Despite hopes in Washington that inflation would subside, the latest inflation numbers show a persistent increase that seems to go beyond the supply woes of the pandemic,reports The Week.
Hike in consumer price index
The Consumer Price Index, which tracks costs of numerous everyday items, rose 6.8 percent in November from a year earlier, the largest increase in 39 years. “Policymakers were comfortable dismissing high inflation for a while, saying it came from kinks that seemed likely to eventually work themselves out.”
That explained sudden spikes for used cars, for instance. But inflation is now coming from sectors like housing “with a less clear-cut, obviously temporary pandemic tieback.” That’s worrisome for the Federal Reserve, which has begun “tiptoeing away from supporting the economy” and is preparing “to speed up the retreat.”
The inflation alarm
We probably owe Larry Summers an apology, said Jordan Weissmann in Slate. The former Treasury secretary was derided early this year when he raised the alarm about “persistent, self-perpetuating” inflation.
Now his warning “appears incredibly dead-on.” What Summers was wrong about was why; this is not caused mainly by government spending. Summers is not the only one to blame the inflation on “too much stimulus,” said Greg Ip in The Wall Street Journal. Others, meanwhile, point to “pandemic-related bottlenecks and supply chains.”
Inflation report
November’s inflation report was probably the best the White House could hope for, said Thomas Franck in CNBC. “As hot as 6.8 percent year over year inflation is,” it fell below some Wall Street expectations. Some economists suggested that there were indications from the report “that inflation could peak in the next few months.
” It’s easy to overlook that President Biden is presiding over the strongest two-year performance on growth, jobs, and income in decades,” said Robert Shapiro in the Washington Monthly. Inflation remains a fly in the ointment. But if price pressures ease, “everything else points to a Biden boom through 2022.”
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Source: The Week
