Friday’s inflation report has brought unwanted surprises to the White House, the Federal Reserve Board and investors.
Many economists and some government officials expected prices to show signs of chilling, but the opposite was true. It’s a re-acceleration of price increases that will likely have to put the Fed on the economy as it looks. Slow down the fastest inflation pace in 40 years.
As one leftist think tank said, the report was “quite ugly.”
The news dispels the idea that inflation has already peaked as the midterm elections approached in the fall, potentially fueling more politically and economically to the Biden administration’s largest domestic policy vulnerability. did.
It also raised the possibility that the Fed, which has already begun to raise borrowing costs to curb demand, will have to make a series of significant rate hikes over the next few months.
Consumer price index data show increasing evidence that the war in Ukraine continues to push up prices for food, gasoline, electricity and other staple foods. Inflation rates for services such as housing remained high. Inflation in consumer goods, which governments expected, surged anew after the slowdown in the spring, as supply chain roars occurred in areas such as the automotive manufacturing industry. The cost of staple foods such as eggs, meat and bread has skyrocketed, and indicators of measuring the price of food at home have recorded the largest annual increase since 1979.
Understand inflation and its impact on you
“The 1970s have been called and we want to regain inflation. There is no room for sugar coating this,” a TD Securities analyst wrote in a report shortly after its release. “This report should be a major concern for the Fed.”
Slower and more stable with low inflation, after White House officials expressed hope to reporters on Thursday, saying the report will show signs of an economy starting to shift towards what the president said. His goal of economic growth, the Allies, did little on Friday to dispel the idea that the numbers were challenging and disappointing.
The White House Economic Advisers said in a series of Twitter posts that “price increases are widespread,” but that core inflation, excluding volatile commodities such as energy and food, has fallen slightly from the initial average. Stated. Year.
The outside allies were dull. Washington’s Liberal Institute for Economic Policy wrote on Twitter that the report “is pretty ugly-and shows the pain experienced by workers and their families.”
Republicans have said the 2021 economic bailout bill has effectively overheated the economy, and the president has blamed the increase for more than a year. “The truth is that inflation wasn’t just sneaking up on the Biden White House,” Missouri Rep. Jason Smith, a top Republican member of the Budget Committee, said on Friday. “The warning sign was there all the time.”
Biden and his team call inflation a subtle pivot to inflation, calling it his top economic priority and expressing more and more sympathy for households struggling to cope with rising prices. I’m trying to make. They tried to reassure the market by leaning on a message of confidence in the FRB to manage inflation associated with rising interest rates, but when they tried to project a sense of urgency with the actions approved by the authorities, prices were widespread at best. It has only a small impact — as announced this week, the government has suspended tariffs on some imported solar panels.
Inflation FAQ
What is inflation? Inflation is the loss of purchasing power over time. So tomorrow the dollar won’t fall as much as it does today. This is usually expressed as an annual change in the prices of daily necessities and services such as food, furniture, apparel, transportation and toys.
Officials are also looking for additional ways Biden could lower the price of gasoline. This is largely determined by the world’s market power, and it is very difficult for the president to make a big impact in the short term.
At the same time, the administration sought to convince Americans that Mr Biden had plans to pull the economy away from its current state. It frustrates consumers and weighs heavily on his votes.
Data refused to cooperate, and soaring prices continue to hurt American families. A statistic from the Ministry of Labor on Friday highlighted the damage. It showed that inflation-adjusted average hourly wages fell 3% in May year-on-year.
In reality, this means that a typical American worker has lost purchasing power over the past year.