June 17, 2021
Inflation Fears Start to Creep in at the Federal Reserve
After months of saying that inflation fears were misplaced, the Fed has changed its tune. Yesterday, the Fed sounded far more unsure if the recent surge in prices of goods and services would be temporary or a longer-lasting problem.
Yahoo Finance: “Is there a risk that inflation will be higher than we think? Yes,” Chair Jerome Powell told a press conference. He spoke after financial markets were taken by surprise when policymakers signaled they expect to make not one, but two, hikes to interest rates in 2023 from near zero now.
“The Fed has been in a tug-and-pull with investors and critics over whether recent spikes in prices as the economy reopens from the pandemic will be transitory, as officials have argued, or prove more lasting.
“‘There is a lot of uncertainty,’ Powell said. Indeed, Fed policymakers moved up their forecasts for inflation over the next three years after a two-day meeting of the Federal Open Market Committee.”
The prices of goods and services have risen significantly over the past couple of months as Democrats have flooded the economy with stimulus money. The Biden administration is still advocating for a massive infrastructure bill and an accompanying spending proposal that would eclipse $4 trillion.
A CNBC article from two days ago shows that Americans’ fears are rising as prices increase.
CNBC: “As the economy quickly picks up steam in the wake of the Covid pandemic, Americans expect inflation to jump in the months ahead.
“Overall, the expectation is that the inflation rate will be up to 4% one year from now — a new high for one-year-ahead inflation expectations — and at 3.6% three years from now, the highest level since August 2013, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations for May.
“Expectations for how much more consumers will spend on homes, food, rent, gas and the cost of a college education all rose in the most recent report.”
Recent polling in New Hampshire shows how widespread inflation fears are among American families.
WMUR: “Inflation was cited as a concern by 83 percent of those polled while 77 percent said they were ‘very’ or ‘somewhat’ worried about the national debt.”
Bottom Line: The rising cost of goods and services are effectively a hidden tax on the American people. If Democrats continue injecting the economy with trillions of dollars of stimulus money, lower and middle-income families will continue to suffer.