US Inflation at 31-Year High! What Do We Expect Now? (Markets & Economy)
Yesterday the US released their latest inflation figures and although we expected them to be high, they managed to exceed that by far. The year on year figure was 6.2%, which makes it the highest level of inflation in over 30 years.
President Biden was making a public appearance yesterday to promote the benefits of his infrastructure bill. The Democrats have been calling for this sort of roadshow to show the public how they’re improving the economy since recent polls have been pretty bad and the headlines haven’t exactly been singing Biden’s praises. But his main talking points got overshadowed by the CPI release and he ended up having to talk about inflation instead.
What Is Biden Doing to Solve the Inflation Problem?
Firstly, he’s got his top economic aides focusing on reducing energy costs. However, following the EIA report this week, it’s looking more unlikely that they’ll take extreme emergency action. This makes it unclear exactly what they can do that will have a material impact on energy prices. I’d say it’s more likely to be something that doesn’t move the needle much but saves face politically by showing he’s doing something.
Biden is also meeting with business leaders and trying to solve supply-chain bottlenecks such as the issues at ports. However, not only is this focusing on the micro issues rather than the macro issues, but it’s also like playing a big game of whack-a-mole; Once a shortage is solved in one area, the issue moves to another instead. Again, I believe this is unlikely to provide meaningful relief to inflation overall, it’ll only help individual cases.
Then we get onto the infrastructure bill. Biden’s planning to sign it into law on Monday and he’s meant to be promoting the benefits of it. Critics are saying the infrastructure bills will cause inflation to rise further. Biden has already been citing a letter from economists saying his economic agenda would reduce inflation. He may be right about this causing prices to drop in the long-term but they aren’t going to be solving any short-term inflation issues.
The second part of his agenda, another big legislative package, is being heavily questioned now. Biden would…