Inflation is not going away any time soon – and Biden will have to wait it out like the rest of us

On Thursday, November 11, 2021, customers waited in line at the grocery store in San Francisco.
David Paul Morris | Bloomberg | Getty Images

Inflation, which had been dormant for many years, is now a major concern to the White House.

The Biden administration has intensified its efforts to address the problem in recent months. supply-chain interruptionsThe hot inflation is being blamed by economists. President Joe BidenAs a solution to inflation concerns, he has been pushing for his economic agenda.

However, if you ask economists, investors, or the American public about their opinions on inflation, they’ll tell you there’s no way to predict a slowdown in inflation. It is likely that every person, including the president and everyday voters, will have to be patient to see this through.

Jason Furman, an economist during the Obama presidency and ex-chairman of the White House Council of Economic Advisers said that “I don’t believe you want people to swear off inflation going away.”

“I believe the most difficult thing about communicating is not all problems have a solution. He said that patience is a key part of repairing our economy. It’s not an easy message for any president. They must be perceived as being doing things.

Politics of price

Americans on low or fixed incomes are being affected by rising food and fuel prices. Prices for grocery items rose 1.1% in October. Laundry and dry-cleaning prices increased 6.9% over a previous year. Some parts of California are selling gasoline at a high of $6 per gallon. General Mills has informed the retailers that it intends to raise prices soon on many of its brands such as Annie’s and Cheerios. according to a reportPublished Tuesday.

The White House’s inflation message has largely focused on the two Biden-backed big bills. The president loves to counter inflation fears by pointing out that economists believe his Build Back Better bill, worth $1.75 trillion, and an additional $1 trillion plan for infrastructure will increase productivity and reduce inflation.

While better roads, child care access, and weatherization could help to reduce costs in the long-term, Democrats are facing crucial midterm elections in just 12 months.

Inflation seemed to be a problem for Terry McAuliffe (Democrat), who was defeated by Glenn Youngkin, Republican in Virginia’s most recent gubernatorial elections.

The election was regarded by political strategists as an indicator of voters’ attitudes toward current policy direction with Democrats controlling the White House, Congress and Congress. According to party centerists and progressives in the areas of infrastructure, poverty and climate bill compromise was possible after the prominent defeat by Democrats in Virginia.

Americans feel angsty about the economy. The percentage of people surveyed that cite any economic problem as their top concern has reached an all-time high. according to polling firm Gallup. (The poll surveyed 815 adult respondents and the margin of error was plus/minus 4 percentage point.

26 percent now identify economic concerns as their top concern. Only 7% cite inflation specifically as their main worry. Gallup found that only 1% Americans cited inflation as the top concern in September. Inflation has not been cited as the main problem for at least 7% Americans in 20 years.

“Moms & dads are concerned, asking: ‘Will we have enough food for Christmas? We will be able get the Christmas gifts to our children on time. Biden spoke in a speech Tuesday.

There is no major effect on gas

Biden revealed that some allies and the U.S. will help to reduce fuel prices during the holidays season. tap their national strategic petroleum reserves.

Biden spoke out about rising gas prices, saying that “the fact is we have faced even worse spikes in the past just within the last 10 years.” It doesn’t mean that we shouldn’t wait and watch for gas prices to fall on their own.

The Biden Administration claimed that it would place 50 million barrels oil from its government stocks onto the global market in the coming weeks. However, analysts cautioned that this action is likely to be a pacification tactic.

Tapping the country’s oil reserves won’t have much impact on fuel cost since nearly 40% of 50MM bbl releases were already set for 2022. Also, most of it will be used in commercial stockspiles,” stated Tom Essaye (founder of Sevens Report), a market research firm.

He said that the oil would eventually be purchased “and then returned to the SPR”, meaning that the move was mainly symbolic and will not have any major effect on actual physical markets.

Furman, an economist at Harvard University agrees. He said that drawing on the SPR falls into the “no-stone-left-unturned” category for a White House worried about the political impact of rising prices.

The current inflation, he said, is a function of broad shifts in aggregate demand and aggregate supply — beyond the influence of a one-time appeal to the SPR or any other quick fix.

Inflation expectations

One of the most annoying characteristics of inflation is that price rises today are due to what prices people expect tomorrow. So inflation expectations are a factor in inflation.

The most recent consumer survey by New York Federal Reserve Bank found that the median inflation expectation for October rose to 5.7%, which is the highest ever since 2013.

Recent months have seen a spike in the expectation of inflation among investors over the next five-years.

The Wednesday difference in the yields of five-year Treasury inflation protected securities (or TIPS), and the equivalent Treasury notes was 3.17. This is its highest level since at most 2003. This effectively indicates that investors expect inflation to average 3% within the next five year.

Market-based inflation expectations are on the rise drew the attention of Federal Reserve officialsTheir November policy meeting. The minutes of their November policy meeting were released Wednesday and showed that central bankers considered that the leap was evidence that increasing inflation forecasts have become more mainstream.

“A couple of participants pointed to increases in survey- and market-based indicators of expected inflation—including the notable rise in the five-year TIPS-based measure of inflation compensation—as possible signs that inflation expectations were becoming less well anchored,” the Fed minutes read.

I’ve taught my students how to predict inflation for this year. He explained that if there isn’t enough demand then additional demand may be able to help.

“But if it’s too ambitious, then you will run into supply constraints,” he said. You’ll have higher prices than you will get more.

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