The Fed wants to cool spending; a strike, a shutdown and student loans may add ice

Published Sep 18, 2023 06:13AM ET Updated Sep 18, 2023 09:56PM ET
2/2 © Reuters. FILE PHOTO: United Auto Workers Local 900 members strike outside the Michigan Ford Assembly Plant, in Wayne, Michigan, U.S., September 15, 2023. REUTERS/Eric Cox/File Photo 2/2
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By Howard Schneider
WASHINGTON (Reuters) – U.S. Federal Reserve officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.
The United Auto Workers launched a strike against all three major automakers on Friday with an initial walkout of around 13,000 employees at three plants, but those numbers could grow. Federal elected officials have only until Sept. 30, when current spending authorizations expire, to come up with a deal or federal agencies will have to shutter, and congressional Republicans have stymied negotiations. Student loan repayments restart in October after a three-year suspension during the COVID-19 pandemic.
In isolation, none would likely shift policymakers’ sense of the short-term risks or change their focus on quelling still-elevated inflation.
But with the economy already expected to slow over the final months of the year, prolonged disruptions in the auto industry and at federal agencies could have unpredictable results: Sapping consumer spending, possibly pushing up car prices in a blow to the Fed’s inflation fight, and producing the sort of knock to business and consumer confidence that could spell the difference between a