After May numbers revealed that the consumer price index had soared to a 41-year high of 8.6%, another Obama-era economic expert issued a warning regarding inflation figures.
The new results much exceeded predictions, putting an end to any hopes that consumer price hikes had reached a nadir. Meanwhile, according to AAA, gas prices are averaging $4.98 a gallon, more than double what they were when President Biden took office.
‘Look, right now, you know, if you tamp down on the economy, you’re going to slow price growth and you’re going to slow wage growth. I don’t have any obvious answer for which one of those slows more than the other,’ top Obama economist Jason Furman said on CNBC Friday morning.
‘Right now, we’re in a bad situation where we have a lot more price inflation than wage inflation.’
‘May be slow the economy, may be slow prices more than wages. I just don’t know which of those slows more, so we may be helping people. But we’re not in a sustainable place right now,’ he said.
The new figures released on Friday suggested that the Federal Reserve could continue with its rapid interest rate hikes to combat inflation, and markets reacted swiftly, with the Dow shedding more than 700 points in early trading.
The Labor Department’s report showed that the consumer price index jumped 1 percent in May from the prior month, for a 12-month increase of 8.6 percent.
The annual increase, driven by soaring food and energy prices, was hotter than economists had expected, and topped the recent peak of 8.5 percent set in March, reaching a level not seen since December 1981.
Food prices have also risen quickly, impacted by rising commodities in the wake of Russia’s invasion of Ukraine. Groceries were up 11.9 percent last month, while food away from home rose 7.4 percent.
Prices for services like rents, hotel accommodation and airline travel were also high last month.
It also marked the strongest signal yet that inflation has not yet peaked, as Biden previously claimed as far back as December.
Meanwhile, the Biden administration has been taking heat for price rises from all angles, most especially from Obama and Clinton-era advisors.
Obame economist Stephen Rattner blamed the federal government under Biden and Congressional Democrats for ‘putting too much money in people’s pockets.’
‘We’re all paying the price for having overstimulated this economy during the pandemic and putting too much money in people’s pockets which created a lot of this inflation,’ Rattner said on MSNBC’s Morning Joe Wednesday.
‘There’s no free lunch here, now we’re all going to have to pay the price.’
Clinton Treasury Sec. Larry Summers said that the Fed needs to do some ‘soul searching’ for its own botched calls on inflation, having held off on rate hikes.
On Tuesday Treasury Sec. Janet Yellen said the U.S. faces ‘unacceptable levels’ of inflation after last week she admitted she was ‘wrong’ about how long price hikes would last.
‘I do expect inflation to remain high, although I very much hope that it will be coming down now,’ she told a congressional panel. The Fed aims to keep inflation at 2 percent per year.
‘To dampen inflationary pressures without undermining the strength of the labor market, an appropriate budgetary stance is needed to complement monetary policy actions by the Federal Reserve,’ Yellen said at Tuesday’s hearing.
Biden, Yellen and Federal Reserve chair Jerome Powell promised for months last year that inflation would be ‘transitory.’
‘What I wasn’t anticipating when I insisted that inflation would be transitory was a scenario in which we’d end up dealing with multiple variants of Covid that would be scrambling our economy and global supply chain, and I wasn’t anticipating the impacts on food and energy prices that we’ve seen as a result of Russia’s invasion of Ukraine,’ Yellen said Tuesday. So, as Mr. Powell observed, both of us could have used a more appropriate phrase than transient.’
During the hearing, Yellen pushed back on Republican worries that the $1.9 trillion American Rescue Plan proposed by Democrats in 2021 could have worsened inflation.
Senator Steve Daines of Montana asked Yellen if she agreed with the San Francisco Federal Reserve Bank’s conclusion that the American Rescue Plan had a “substantial causal influence” on inflation.
‘Inflation is at an all-time high in practically every developed country on the planet.’ ‘And their budgetary policies are very different,’ Yellen added. ‘As a result, it can’t be the case that the majority of the inflation we’re seeing is due to the ARP.’
Yellen further explained that Biden had ‘inherited an economy with very high unemployment.’
‘We had to address the possibility that this could be a downturn that could match the Great Recession,’ the secretary said, explaining the need for the massive stimulus package.
As inflation continues to be a dead weight on the president’s popularity, he said last week that it’s unlikely he’ll be able to flip a switch and bring down inflation or end record gas prices.
‘There’s a lot going on right now. But the idea we’re going to be able to click a switch, bring down the cost of gasoline, is not likely in the near term. Nor is it with regard to food,’ he said.
‘We can’t take immediate action that I’m aware of yet to figure out how we’re bringing down the prices of gasoline back to $3 a gallon. And we can’t do that immediately with regard to food prices either,’ he said.
Biden cited the war in Ukraine, which has bottled up the country’s wheat exports.
Meanwhile, a whopping 8 in 10 Americans are unhappy with the Biden economy.
A combined 83 per cent of Americans now say the state of the economy is either poor or not so good, according to a new Wall Street Journal-NORC poll released Monday.