Stubbornly high levels of inflation are really taking their toll on middle- to lower-income Americans, explains a key member of President Joe Biden’s inner economic circle.
“This is a serious and pressing challenge for American households who haven’t seen these levels of inflation in many decades,” said Jared Bernstein, Council of Economic Advisors member.
Bernstein said the administration is doing “everything” it can to help bring levels of inflation down.
To be sure, the administration is up against continued eye-opening inflation readings in part triggered by pandemic supply-chain disruptions.
The Bureau of Labor Statistics’ December CPI reading showed prices rose at a 7.0% year-over-year clip at the end of 2021, marking the fastest increase since 1982. Gains reflected strong increases in the prices of shelter and used vehicles, among other items. The headline increase matched economist estimates, and accelerated from November’s already elevated 6.8% increase.
Within the report, the food at home index rose 6.5% over the last 12 months, compared to a 1.5% annual increase during the last 10 years.
More recently, companies from coffee giant Starbucks to industrial player 3M have warned of persistent inflation and likely further price increases to protect profits.
“As inflation continues to grow we saw that we needed to take additional action and we did so effective Jan. 1. So we’ve taken two moves around pricing to help mitigate the challenges that we’re seeing. Now we also have additional pricing actions that we have planned for the balance of the year that will additionally help offset the trends in some of the cost pressures that we’re seeing,” said Starbucks CFO Rachel Ruggeri on a Tuesday evening earnings call.
In order to get inflation under control, most economists think the Federal Reserve will hike interest rates seven times by the end of 2023. Others on the Street are more aggressive in their rate expectations.
Bank of America’s global head of economics Ethan Harris sees the Fed lifting interest rates by seven times this year.
“I think it’s important to understand that the Fed is a bit behind the curve here. Normally at this stage of the cycle, the Fed would have already hiked 100 or 150 basis points, and they would still be hiking as I speak,” Harris said.