Inflation is a hot topic now, with comments from Federal Reserve Chair Jerome Powell looking like veiled hints as to when (no longer if) the Fed will get serious about hitting the monetary brakes to slow the economy. Until recently, inflation was described as transitory, or just passing through. But at some point, as the days flutter by, the story has to change. Transitory? Temporary? Or had we better get used to it?
Now, Fed commentators and others are suggesting price levels will rise into 2022. There can be no doubt that we have inflation and that the Fed can clobber the economy to purge it, but some basic questions remain to be addressed: What’s so bad about it? Can’t we just learn to live with it? What needs to change?
Yes, inflation is real. The all-item consumer price index (CPI) was up more than 5 percent on a year-over-year basis for July, August, and September, and now shows a 6.2 percent increase for October—the largest jump since 1990. The Fed considers 2 percent inflation to be its bright-line monetary policy goal. Obviously, there is a large gap between that and what we are seeing on the ground.
Soaring inflation is shaking up negotiations on Capitol Hill over President Biden’s Build Back Better agenda, giving Sen. Joe Manchin (D‑W.Va.) and other centrists more leverage to push for a smaller reconciliation package.
The annual inflation rate hit a 30-year high under Labor Department statistics released Wednesday, giving ammunition for Manchin to argue against government spending.
In the wake of the numbers, Democratic aides and strategists are growing less optimistic that Manchin can be persuaded to support adding back a proposal to establish a national paid family leave program. And it’s possible Manchin could more forcefully press for new cuts.
You’ve probably realized that shopping for food and household basics is more expensive these days. Expect to keep paying more for groceries in 2022.
Prices shoppers paid for groceries climbed 1% in October from September and were 5.4% higher than at the same time last year, according to data released Wednesday by the Bureau of Labor Statistics.
Overall, prices, which also include things like rent, cars and energy, climbed 6.2% over the last 12 months, the largest increase since 1990.