How’s the fight against inflation going? About as well as Biden’s fight against the Taliban in the first few months of his presidency or his trip to Saudi Arabia to beg for them to pump more oil went: that is, not all that well. Very badly, some might say.
The latest update on that losing fight against an inflated dollar and rising prices came from the CEO and President of the Federal Reserve Bank of Minneapolis, Neel Kashkari. He said Sunday that, currently, the inflation problem is “very concerning” and “spreading out more broadly across the economy.”
Speaking on that, Kashkari, who sounded his warning about the inflation problem when speaking to CBS’ “Face the Nation”, said:
“It’s very concerning. We keep getting inflation readings, new data that comes in as recently as this past week, and we keep getting surprised. It’s higher than we expect.
“And it’s not just a few categories. It’s spreading out more broadly across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back down.”
So not only is the inflation problem continuing to hammer away at the value of the dollar and making goods more expensive, but the problem is no longer contained to those few categories and is instead spreading out across the economy and impacting even more types of goods.
That’s a problem because it will make the inflation crisis even more of a problem as consumers that avoided some of it by avoiding purchasing the goods that have been most impacted by inflation will no longer be able to do so with it spreading across the economy.
Continuing, Kashkari explained how somewhat rising wages aren’t helping because inflation is outpacing them, saying:
“For most Americans, their wages are going up, but they’re not going up as fast as inflation, so most Americans’ real wages, real incomes are going down. They’re getting a real wage cut because inflation is growing so quickly.
“I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral – that is not yet happening. High prices and wages are now trying to catch up to those high prices. Those high prices are now being driven by supply chains and the war in Ukraine among other factors. And so we need to get the economy back into balance before this really does become from a very wage drive inflation story.”
Then, commenting on what inflation is and why the inflation problem has continued to impact Americans despite the Fed scrambling to deal with it, he said:
“Just at its basic level, inflation is when demand is outstripping supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID.
“We hoped that supply would come online more quickly. That hasn’t happened. So, we have to get demand down in the balance. Now, I hope we get some help on the supply side, but that doesn’t change the fact that the Federal Reserve has its job to do, and we are committed to doing it.
“We cannot wait till supply fully heals. We have to do our part with monetary policy.”
He also noted that the recent bill Democrats released in the hope of fighting inflation would do little to actually impact the inflation problem, saying:
“Over the short term, the demand side effects totally swamped the supply side effects. And so, when I look at a bill that’s being considered that your two senators talked about, my guess is over the next couple of years, it’s not going to have much of an impact on inflation. It’s not going to affect how I analyze inflation over the next few years. I think long term it may have some effect, but over the near term we have an acute mismatch between demand and supply, and it’s really up to the Federal Reserve to be able to bring that demand down.”