President Joe BidenThursday’s announcement focused on wage growth and projections of tapering inflation, even though a report revealed that prices continue to rise at the fastest rate in over 40 years.
Biden stated in a press statement that “While today’s report is high, forecasters still project inflation decreasing substantially by 2022.” We were able to see positive real wage growth and moderate auto price increases last month. These have accounted for about 25% of the headline inflation in the past year.
“We will continue our fight to reduce costs in areas where families and workers have been disadvantaged for many decades,” he said.
Two hours ago, the Labor Department had reported that U.S. consumer prices were at their highest point. rose 7.5% in the 12 months through JanuaryThis is the fastest annualized rate of change since 1982. The CPI rose 6% without taking out volatile gas prices and groceries, as opposed to the 5.9% estimate. Inflation core rose at the fastest rate since August 1982.
Over the last few months, inflation has become one of the Administration’s main economic issues. Rising prices at gas pumps and grocery stores have eroded Americans’ pockets. Inflation reduces the purchasing power of consumers and results in lower real incomes for households.
To curb rising prices, the White House only has limited power. This includes tapping into the strategic petroleum reserve and shoring up U.S. supply chain systems. It also encourages workers to get back to work as quickly as possible.
Although investments in American infrastructure, which are supported by Biden’s administration, may reduce prices long term and help to keep them down in the short term. The White House does not have any options in the immediate future to control prices. Biden and Treasury Secretary Janet Yellen, however, have said in recent weeks that they support the Federal Reserve’s move to increase interest rates and tighten monetary policies to reduce inflation.
Congress gives the Fed authority to set interest rates so that there is maximum employment and stability in prices. The central bank may raise interest rates to stop spending if the economy is too hot.
The Fed is expected to raise rates in March, according to market forecasters. This will continue through 2022.
Biden stated that the Federal Reserve had provided exceptional support over the past year and a quarter during the crisis. “Given the strength of our economy and pace of recent price increases, it’s appropriate — as Fed Chairman Powell has indicated — to recalibrate the support that is now necessary.”
Yellen echoed the thoughts of her boss a day later.
“I expect inflation throughout much of the year – 12-month changes – to remain above 2%,” she said at the time. If we are able to control the pandemic, then I anticipate inflation will decrease over the next year. Then it should hopefully return to the normal level of 2% by the end.