The 19th century English fable Goldilocks tells the story of a young girl who breaks into the home of three bears and eats their porridge. Luckily, they have three different bowls ready for consumption: One is too hot. One is too cold. The other is just right.

Naturally, in setting monetary policy, the Federal Reserve wants to be like Goldilocks. But its concern is not porridge; it’s the US economy. How does it want it? Not too hot. Not too cold. Just right.

The main way that the Fed adjusts the economic temperature is by setting interest rates: By raising the cost of borrowing, the Fed slows down the economy, depressing wage gains and often increasing unemployment.

In her search for equilibrium, Goldilocks has a friend in corporate media. The search for the just-right interest rate, one that will punish workers—but no more than necessary, trust us!—is cheered by supposedly objective reporters at outlets such as the New York Times, Washington Post and Wall Street Journal.

‘Weirdly narrow measure’

The latest numbers would suggest Goldilocks—and her media friends—are getting what they want. The Bureau of Labor Statistics’ latest Consumer Price Index (CPI) data, released January 12, showed prices rose by 6.5% in December from a year earlier. As the BLS’s news brief (1/12/23) noted, “This was the smallest 12-month increase since the period ending October 2021.” Meanwhile, the unemployment rate has remained low, dropping to 3.5% in December.

Reacting to the new inflation numbers, the liberal economist and New York Times columnist Paul Krugman (Twitter, 1/12/23) quipped, “At this point the case for rate hikes has a real one-eyed-bearded-man-with-a-limp feel—you have to use a weirdly narrow measure to still see an inflation problem.” He and Dean Baker, a progressive economist at the Center for Economic and Policy Research, both pointed to the annualized CPI rate over the past three months—how much prices would rise in a year, if the recent trend continued. This measure sat below 2%, which they touted as strong evidence for pausing rate increases.

Progressives have in fact been advocating a pause on rate hikes for quite some time. Dean Baker, for instance, called for a pause back in September 2022 in a piece he co-authored with the Nobel Prize–winning economist Joseph Stiglitz (Project Syndicate, 9/12/22). In November, the AFL-CIO blasted rate increases, declaring:

The Fed seems determined to raise interest rates, though it openly admits those rates could ruin our current economy as unemployment remains low and people are able to find jobs.

Others, such as progressive economists James Galbraith and JW Mason, have opposed rate hikes since the beginning (Nation, 2/18/22; Slack Wire, 3/2/22).

These progressives believe the porridge may already end up too cold. In particular, they are concerned about the effects that higher interest rates will have on workers, given higher interest rates’ habit of depressing wage gains and hiking unemployment. After all, monetary policy is known to operate with “long and variable” lags; as Krugman has written, “I sometimes think of the Fed as trying to operate heavy machinery in a dark room—while wearing heavy mittens.” So it’s unclear how much of the effect of increased interest rates has already shown up in inflation numbers.

As Raphael Bostic of the Federal Reserve Bank of Atlanta put it in a recent article (11/15/22), “A large body of research tells us it can take 18 months to two years or more for tighter monetary policy to materially affect inflation.” With inflation already falling for six months straight, why risk further rate increases?

‘Gentler path’

This opposition to interest rate increases is almost entirely ignored in corporate media coverage of inflation data. After the CPI numbers came out on January 12, for instance, the coverage at a number of prominent outlets effectively omitted arguments in favor of pausing interest rates.

Take the New York Times. In an article (1/12/23) released the same day as the CPI numbers, reporter Jeanna Smialek observed:

For the Fed, the report confirms that the slowdown in price gains that officials have long expected is finally coming to fruition. That could help policymakers, who have begun slowing the pace of interest rate increases, feel comfortable moving even more incrementally.

After referencing the Fed’s step down to a 50 basis point (half a percentage point) increase in interest rates in December, after four consecutive 75 basis point hikes earlier in the year—the fastest pace of rate hikes in decades—Smialek wrote:

Now, policymakers have made it clear that they are contemplating an even more modest quarter-point change in February. The fresh inflation data probably bolsters the case for that gentler path, which will give officials more time to see how their policies are playing out in the economy and how much more is needed.

Though the word “probably” is thrown in as a hedge, it’s hard to miss the tacit endorsement of a “gentler path.” This path, of course, does not involve heeding the advice of progressives and abandoning further rate increases, but rather raising rates by a smaller amount than uber hawks might like to see. Smialek elaborated on her reasoning further down the page:

The new report did little to suggest that the problem of rapid price increases has been entirely solved, which is why central bankers are still expected to push borrowing costs at least slightly higher and leave them elevated for some time to wrestle price increases under control.

The idea that the problem of inflation no longer requires rate hikes is not entertained here. Meanwhile, as mentioned above, the foremost economics columnist at the Times tweeted that same day that “you have to use a weirdly narrow measure to still see an inflation problem.”

It takes this article until the third to last paragraph to finally dig up someone opposed to further rate hikes. But this dissenter is not consulted about his dissent; instead, he’s quoted discussing the financial markets’ optimism about a coming dovish turn in Fed policy.

‘Families desperate for signs’

At the Washington Post, Rachel Siegel’s coverage (1/12/23) of the CPI report was no better. Siegel discussed the Fed’s likely path forward, writing, “Central bankers haven’t finished yet, and they’ve signaled two or three more increases in the coming months.” She did point to the likelihood of a pause in hikes soon, noting:

The obvious risk is that the Fed might slow the economy so much that a recession starts. If history is any guide, that could happen this year as the full effect of high rates takes hold.

But that’s as close as you get to dissent in her piece.

Throughout Siegel’s article, the Fed’s monetary tightening is framed as a noble quest to help besieged Americans overcome their inflation woes. From the second paragraph:

Inflation is still well above normal levels, and the economy remains vulnerable to shocks that could send prices back up. But officials and American families have been desperate for signs that the Federal Reserve’s fight against inflation is working and that the economy, especially the labor market, will continue to stabilize in 2023.

A stabilized labor market, in this case, is one in which power has shifted back towards employers after a rowdy period of worker mobilization. Not sure workers at companies like Amazon would be a big fan of that sort of stability. But I can think of someone who would like it. (Hint: his name rhymes with Beff Jezos.)

The piece ends with a quick profile of Mikhail Andersson, the owner of a New York tattoo parlor. Siegel reports that inflation has taken a toll on Andersson’s company. But, she notes, “Andersson has seen a pickup in business since the year began, possibly driven by customers who got gift cards or cash over the holidays. He hopes the trend sticks.” Will you look at that! The Fed is here to save the day.

‘Fed can’t end yet’

The Wall Street Journal piled on to the heap with three brutally biased pieces on the CPI numbers. One (1/12/23), by Gwynn Guilford, had as its fourth paragraph:

The figures added to signs that inflation is turning a corner following last year’s surge. They also likely keep the Fed on track to reduce the size of interest-rate increases to a quarter percentage point at their meeting that concludes on February 1, down from a half-percentage point increase in December.

No criticism of this path is included. Its likelihood is merely stipulated, its detractors left to the side.

Similar to the Washington Post piece, the article concludes with a quick profile of an American who was negatively impacted by inflation. However, the article does mention that the man, a recent homebuyer, was hurt by higher interest rates as well. So I guess that’s balance.

One of the other pieces in the Journal (1/12/23), by Greg Ip, starts by observing, “Signs are emerging that most of the surge through 2021 and the first half of 2022 was actually transitory—as Federal Reserve officials first thought.” But Ip quickly adds, “This doesn’t mean the inflation battle is over.”

Ip makes his position perfectly clear towards the end of the piece: “Unemployment is now 3.5% and consumers expect 4.6% inflation in the coming year, according to the University of Michigan. This is why the Fed can’t signal an end to interest rate increases yet and the risk of a recession can’t be dismissed.” No argument for a rate pause is entertained.

Finally, in a third piece (1/12/23) titled “Inflation Report Tees Up Likely Quarter-Point Fed Rate Rise in February,” the Journal addressed head on the debate over how much to raise interest rates. “How about not at all?” was not an option. The article started by noting:

Fresh data showing inflation eased in December are likely to keep the Fed on track to reduce the size of interest rate increases to a quarter-percentage-point at its meeting that concludes on February 1.

It then set the frame of debate with the following paragraph:

Fed officials have kept their options open on whether to raise rates by either a quarter percentage point or a half percentage point at their next meeting, saying that the decision would be strongly guided by the latest data about the state of the economy.

So 25 points or 50 points, take your pick. Where’s the dissent from rate-hiking mania? Nowhere.

Marketplace has been another offender in the rate-hiking madness. Its segment (1/12/23) on the CPI data on January 12 concluded cheerily, “The Fed has plenty of reasons to reduce the speed of its interest rate hikes.” Abandon them altogether? No, no, no. Don’t mention that!

Not the Fed’s gauge

While the CPI numbers got prominent coverage at corporate outlets, the inflation gauge actually used by the Federal Reserve to set its inflation target received less attention. The Fed’s preferred measure is the Personal Consumption Expenditures (PCE) Index, the latest numbers from which were released on January 27 by the Bureau of Economic Analysis. According to the Brookings Institution (6/28/21):

Because its formula uses updated data, the PCE is believed to be a more accurate reflection of price changes [than the CPI] over time and across items. Over time, the two measures tend to show a similar pattern, but the PCE tends to increase between 2/10ths and 3/10ths less than the CPI.

That the PCE could provide a more accurate image of inflation, as well as a less alarming one, does not persuade corporate outlets to foreground it in inflation coverage. The opposite, in fact: January’s PCE numbers got fairly sparse coverage in corporate media.

At the New York Times, the main article discussing the PCE numbers (1/27/23) registered as a two-minute read, while the other (1/27/23) focused primarily on consumer spending data. At the Wall Street Journal, the headline (1/27/23) folded the PCE release into a story about consumer spending: “Consumer Spending Fell 0.2% in December as Inflation Cooled.” And at the Washington Post, coverage of the numbers was outsourced to an Associated Press wire (1/27/23).

Why might coverage of the PCE numbers pale in comparison to coverage of the CPI data? On the one hand, the answer is rather straightforward. As the BLS puts it in their CPI FAQ, “The CPI is the most widely used measure of inflation.” Moreover, it comes out earlier than PCE data.

On the other hand, though, a disproportionate focus on CPI numbers paints a frightening picture of inflation that would be tempered by a focus on PCE data. The CPI index showed a 6.5% annual increase in inflation in December, whereas the PCE clocked in at 5%. And if the PCE index is what the Fed is actually talking about when it discusses bringing inflation down to a 2% target, wouldn’t it make sense to put PCE data front and center?

Reading the coverage of inflation numbers at corporate outlets brings to mind the old Noam Chomsky quote: “One reason that propaganda often works better on the educated than on the uneducated is that educated people read more, so they receive more propaganda.” Someone who consistently reads outlets like the Times, Post, or Journal (or listens to a show like Marketplace) may not even think to question the idea that rates ought to be raised. The idea that pausing rates could be a reasonable position has been bludgeoned out of their minds by the relentlessly biased framing of the debate by corporate outlets.

Meanwhile, Goldilocks doesn’t seem to care that her porridge may end up cold. Maybe that’s not even what she plans on eating anymore. “Eat the rich?” ponders Goldilocks. “Nah, eat the poor.” And corporate media asks, “Why not?”

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