Rising prices make Americans gloomy about the economy, even if they’re not climbing as fast as they used to.
by Claudia Sahm
Bloomberg.com
The people who experience the US economy continue to disagree with the people who measure it, and the most likely reason is inflation: Most Americans still see it as a major problem, while most economists don’t. But this debate recently veered from economics to semantics. Has the common definition of “inflation” changed, and do economists just need to accept it?
Felix Salmon of Axios essentially answers yes to both questions. “The meaning of the word ‘inflation’ has changed” he writes. “It used to mean rising prices; now it means high prices.” This helps explain, he says, the disconnect between Americans’ perceptions of the economy and economists’ assessment of it.
If you have felt startled by your total at the grocery store checkout line, you’re not alone. Since the onset of the Covid pandemic, US grocery prices have risen faster than the rate of inflation. People are now paying 25% more for their groceries than they were pre-pandemic, and for the past three years, grocery prices have increased more and grown faster than other prices, according to a recent report.
Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, says one of the things he has learned in the past few years is that consumers would rather see the economy fall into a recession than to continue to suffer the pain of soaring prices.
On Monday’s broadcast of CNBC’s “Last Call,” Professor of the Practice of Economic Policy at Harvard University and the Harvard Kennedy School Jason Furman, who served as Chairman of the Council of Economic Advisers under President Barack Obama and on the Council of Economic Advisers and the National Economic Council under President Bill Clinton dismissed arguments that corporate greed is the cause of inflation and argued that companies always try to maximize their profits and didn’t just start deciding to do so in the past couple years, and the real culprit was demand spiking.
Inflation persistence has eased only slightly after surging higher at the start of the year, according to a gauge from the Federal Reserve Bank of New York.
The long-term forecast for higher interest rates, according to Treasury Secretary Janet Yellen, makes it more difficult to control US borrowing needs, which emphasizes the significance of raising revenue in the forthcoming budget talks with Republican lawmakers. There is only one problem. She is wrong.
(Bloomberg) — Australian central bank Deputy Governor Andrew Hauser said the “first and predominant challenge” for policymakers is to bring down inflation, according to an interview with the Australian Financial Review.
As food costs have skyrocketed for Americans, some of the country’s biggest chains and grocery brands, including General Mills, PepsiCo, and Tyson, have blamed the price hikes on supply chain issues and economy-wide inflation. But behind the scenes, these companies have expanded profits and quietly authorized billions of dollars in lucrative stock buyback programs and dividend payouts to shareholders.
Inflation ticked down further in April, according to new data from the Bureau of Economic Analysis (BEA). The Personal Consumption Expenditures Price Index (PCEPI), which is the Federal Reserve’s preferred measure of inflation, grew at a continuously compounding annual rate of 3.1 percent in April, down from 4.1 percent in the prior month. It has grown at an average annual rate of 3.7 percent over the last three months.