(Official Washington Examiner editorial, June 11) The Federal Reserve, Congress, and President Joe Biden are all complicit in the intensifying growth of price inflation, and all three should ratchet back their reckless policies that are causing it.
However, Biden should take the lead, as it is his own policy choices most likely turning his administration into the second coming of Jimmy Carter’s inflation and malaise.
The Bureau of Labor Statistics reported Thursday the annualized inflation rate in May was 7.2%, making it the third consecutive month in the annualized high single digits. Overall, prices have risen by 5% since last May, despite the coronavirus-caused slowdown for the first half of that time period.
While some inflationary pressures are normal in early stages of a bounceback from an economic shock, the price hikes in the last three months are extreme. If they continue much longer, inflationary expectations can become an entrenched, self-fulfilling fear — a fear justified by real-life policies which cause inflationary fever.
Four factors are feeding the price hikes, with at least three of them likely to continue unless policymakers change course. The one that may naturally work itself out involves supply-chain disruptions caused by COVID-mandated shutdowns. We can only hope Biden, Congress, and regulators don’t do anything to retard the natural rebound from that problem.
The second factor is one Biden doesn’t directly control, but something a president’s pointed words can usually influence if he has the will. More than any other institution, the Federal Reserve has responsibility by explicit law for keeping inflation in check, but presidential jawboning can help remind it of that mission. Jawboning may be needed.
For whatever reason, Federal Reserve Chairman Jerome Powell and his colleagues continue priming the inflationary pump even after it became obvious a month ago that prices had begun dangerously overheating. While there is no need for the Fed to artificially boost interest rates to dampen prices, there is every good reason to reverse its policy of engaging in $120 billion in asset purchases. Forgive the cliché, but this extravagance is like setting up fire to go on a blind date with gasoline. It’s not just unwise but reckless…. [The full editorial is at this link.]
