New numbers out this week show that inflation is increasing at the fastest rate since January 1982.
Economists say the consumer price index — which measures a basket of goods including gasoline, health care, groceries and rent — shows prices surged 8.5 percent in March from the year-ago period, toppling the previous month’s 40-year high of 7.9 percent news outlets reported.
The Biden administration is in damage-control mode ahead of the newest inflation data, with press secretary Jen Psaki telling reporters on Monday that the White House expects to see that inflation accelerated again in March as a result of the Ukraine war and the ensuing sanctions on Russia. “We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike, she said.
Psaki’s statement was mocked as economists pointed out inflation has been rising since the Biden administration took office.
The data will also have major implications for the Federal Reserve, which has taken a more hawkish approach to fighting inflation in recent months: Policymakers raised rates by a 0.25 percentage point in March and since have signaled support for a faster, 0.5 point increase at their May meeting.
“Many participants noted that one or more [0.5-point] increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified,” the Fed minutes from its March meeting said.
The biggest question now is whether central bank officials can successfully tame inflation and stabilize prices without triggering an economic recession. Raising the federal funds rate tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.
Chairman Jerome Powell has pushed back against concerns that further tightening by the central bank will trigger a recession and has maintained optimism that the Fed can strike a delicate balance between taming inflation without crushing the economy.
“The probability of a recession in the next year is not particularly elevated,” Powell told reporters during the Fed’s March meeting, citing the strong labor market, solid payroll growth and strong business and household balance sheets. “All signs are that this is a strong economy and one that will be able to flourish in the face of less accommodative monetary policy.”
–Alan Goforth | Metro Voice