Inflation in the United States reached its highest level for three decades in October. Consumer prices rose 6.2% year on year, unprecedented since November 1990. “Inflation is hitting Americans in the wallet, and reversing this trend is a top priority for me,” President Joe Biden immediately lamented in a statement. He blamed the rise in energy prices, which rose 30% over the past year while food prices were up 5.3%. But excluding energy and food, the index also soared to 4.6 points over twelve months, against 4% in September: this is the highest level recorded since August 1991.
Inflation is setting in in the United States, with annual prices rising above 5% for the past five months. Mr. Biden, who has fought, since coming to power, oil extraction and its consequences on the environment at the risk of pushing up energy prices, is now seeking to bring them down and resolve the many bottlenecks in the economy. ‘bottlenecks and shortages (freight, microprocessors, labor, energy) which hamper the recovery and increase prices.
The president, who is due to travel this Wednesday, November 10 to Baltimore to praise his infrastructure plan – an old tunnel from the XIXe century, which obstructs Amtrak’s rail traffic on the East Coast between Washington and Boston, must be replaced there – believes that this plan “Will reduce these bottlenecks and make the products more available and less expensive”. He also calls on Congress to vote for his social plan called “Build Back Better”, which should regulate the price of drugs and help families, which he believes should reduce inflationary pressures.
The Fed, caught between its two objectives
Above all, Joe Biden calls on the Federal Reserve, caught between its two objectives, the maximization of employment and price stability. The inflation-wage spiral is no longer completely excluded since wages rose in October by 4.9% over one year with an unemployment rate falling to 4.6% of the working population. Obviously, the President of the United States has chosen the camp of minimal orthodoxy: “I would like to reaffirm my commitment to the independence of the Federal Reserve to monitor inflation and take the necessary measures to combat it”, writes Mr. Biden.
This overheating makes it more likely that the Fed’s money rent will rise from 2022. Its key rates have been set between zero and 0.25% since the start of the pandemic. This debate comes as Joe Biden must say whether he is renewing the term of Jerome Powell, a moderate Republican, as President of the Federal Reserve, from 1is February 2022, or prefers a more progressive personality, Democrat Lael Brainard.
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Joe Biden makes inflation reduction his “top priority”