Employers are hiring quickly. Home prices are rising nationwide after months of decline. Consumer spending rose more than expected in the recent data release.

The U.S. economy is not experiencing the drastic slowdown that many analysts expected in light of the Federal Reserve’s 15-month, often aggressive campaign to curb growth and bring runaway inflation under control. And this surprising resilience can be good news or bad news.

The rest of the economy could mean the Fed will be able to subtly drive inflation and slow price growth without plunging America into any kind of recession. But if companies can continue to raise prices without losing customers amid solid demand, that could keep inflation too hot — forcing consumers to pay more for hotels, food and child care and forcing the Fed to do even more to curb growth.

Policymakers may need time to determine which scenario is more likely to avoid overreacting and causing unnecessary economic pain, or underreacting and allowing rapid inflation to become permanent.

With that, investors were betting that Fed officials would skip a rate hike at their meeting on Tuesday and Wednesday before cutting them again in July, treading cautiously while stressing that the pause does not mean an end — and that they remain committed to getting rates below control. . But even that expectation is increasingly uncertain: Markets have spent this week raising the odds that the Fed could raise rates at its meeting this month.

In short, mixed economic signals could complicate Fed policy discussions in the coming months. This is where things are.

Interest rates are above 5 percent, the highest level since 2007.

After a sharp policy adjustment over the past 15 months, key officials including Jerome H. Powell, the Fed chairman, and Philip Jefferson, President Biden’s pick to be the next Fed vice chairman, have indicated that central bankers could pause to allow time to assess how the increase affects the economy.

However, this assessment remains complex. Even parts of the economy that typically slow when the Fed raises rates are showing a surprising ability to withstand today’s interest rates.

“It’s a very complicated, convoluted picture depending on which data points you look at,” said Matthew Luzzetti, Deutsche Bank’s chief U.S. economist, noting that the overall growth numbers as Gross domestic product have slowed down – but other key numbers are holding up.

Higher interest rates can last for months or even years to have their full effect, but in theory should work quickly enough to start slowing down the car and housing markets, both of which revolve around big purchases with borrowed cash.

This story was complicated this time. Buying a car slowed down since the Fed began raising rates, but the auto market has been so tight in recent years — thanks in large part to pandemic-related supply chain issues — that it has cooled. bumpy. Housing has also puzzled some economists.

The housing market weakened significantly last year when mortgage interest rates soared. But rates have recently stabilizedand home prices rose again amid low inventory. Home prices aren’t directly factored into inflation, but their turnaround is a sign that a lot is needed to sustainably cool a hot economy.

Fed officials are also watching for signs that their rate hikes are trickling through the economy and slowing the labor market: As the expansion costs more to finance and consumer demand slows, companies should pull back on hiring. With less competition for workers, wage growth should moderate and unemployment should rise.

Some signs indicate that a chain reaction has begun. Initial claims for unemployment insurance last week jumped to the highest level since October 2021, a report showed on Thursday. People are also working fewer hours per week at private employers, suggesting bosses aren’t trying to squeeze as much out of existing employees.

However, other signals stopped more. The job offer had come down, but rose again in April. Wages were climbing less quickly for lower-income workers, but gains remain abnormally fast. The unemployment rate rose to 3.7 percent from 3.4 percent in May, but even that was still a long way from the 4.5 percent that Fed officials expected in their latest economic forecast through the end of 2023. Officials will release new projections next week .

And by some measures, the labor market continues to weaken. Recruitment remains particularly strong.

“Everybody talks like the economy is moving in a straight line,” said Nela Richardson, ADP’s chief economist. “Actually, it’s lumpy.

Still, inflation alone may be the biggest wild card that could shape the Fed’s plans this month and throughout this summer. Officials forecast in March that annual inflation, measured by the personal consumption expenditure index, would fall to 3.3 percent by the end of the year.

This download is happening gradually. Inflation was 4.4 percent as of April, down from 7 percent last summer but still more than double the Fed’s 2 percent target.

Officials will receive a related and more up-to-date inflation data for May — the Consumer Price Index — on the first day of their meeting next week.

Economists expect a significant cooling, which could give officials confidence in suspending rates. But if those forecasts are dashed, it could lead to an even more heated debate about what comes next.

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