The White House is sending mixed messages on the United States’s post-pandemic inflationary run, with quiet signals suggesting the period might last years longer than administration officials have publicly indicated.
The Consumer Price Index report for May published by the Bureau of Labor Statistics showed that year-over-year inflation jumped 5.4%, marking three straight months of increases and the single-largest increase since the Great Recession of 2008.
Still, the White House’s Council of Economic Advisers noted roughly 60% of that increase could be attributed to auto industry demand, exacerbated by severe semiconductor shortages.
Cars once again accounted for a large share of the increase. Used cars, new cars, auto parts, and car rentals together made up about 60 percent of core month-over-month inflation 2/ pic.twitter.com/SeYSQZXRjy
— Council of Economic Advisers (@WhiteHouseCEA) July 13, 2021
Federal Reserve Chairman Jerome Powell said recent inflation was uncomfortably above the levels the central bank seeks, concluding two days of testimony in which he sounded somewhat less confident about the economic outlook—and the Fed’s policy path—than earlier this year.
More broad-based price pressures or a weak rebound in the workforce could lead the Fed to conclude it needs to reverse the easy money policies it deployed during the pandemic more rapidly than officials expected a few months ago.
“This is a shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%. And of course we’re not comfortable with that,” Mr. Powell told the Senate Banking Committee on Thursday.