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Inflation is a *huge* deal. The Fed has a dual mandate: to promote maximum employment and stable prices. That's fancy talk for keeping inflation in check. The FOMC closely monitors inflation data, such as the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index. If inflation is too high, the Fed might raise interest rates to cool down the economy and bring prices back under control. If inflation is too low, or if there's a risk of deflation (falling prices), the Fed might lower interest rates to encourage borrowing and spending. Employment is another top priority. The FOMC keeps a close eye on the unemployment rate, job creation, and other labor market indicators. Their goal is to keep unemployment low without causing excessive inflation. If the labor market is strong, with low unemployment and rising wages, the Fed might be more inclined to raise interest rates to prevent the economy from overheating. Economic growth, as measured by GDP, is also a critical factor. The FOMC wants to promote sustainable economic growth. They'll consider factors like business investment, consumer spending, and international trade to assess the overall health of the economy. If the economy is growing too rapidly, the Fed might raise interest rates to slow things down. If growth is sluggish, they might lower interest rates to provide stimulus.
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