Rising prices are putting increasing pressure on President BidenJoe BidenWarren calls for US to support ceasefire between Israel and Hamas UN secretary general ‘deeply disturbed’ by Israeli strike on high rise that housed media outlets Nation’s largest nurses union condemns new CDC guidance on masks MORE and the Federal Reserve to prevent inflation from derailing the recovery from the coronavirus recession.
A surge of consumer demand unleashed by government stimulus, improving vaccinations and fewer pandemic restrictions is putting a strain on global supply chains. Manufacturers and other hard-hit industries are struggling to get back up and running after a year of lockdown measures, causing supply shortages and raising costs.
All of those factors combined to push the consumer price index (CPI) up 0.8 percent in April and 4.2 percent over the past 12 months, the fastest annual rate since 2008, the Labor Department reported this past week. When stripping out the more volatile prices for food and energy, the index registered the biggest monthly increase since 1982.
While the ramped-up consumer spending is a sign of increased optimism, the Biden administration faces political risks as Americans find themselves dealing with inflation levels that the country hasn’t seen in more than a decade.
Deepening concern among Americans about inflation could derail not only Biden’s economic agenda, but the Democrats’ hopes of defending narrow congressional majorities in the 2022 midterm elections.
“Now people are spending again and obviously April’s numbers show that they’re spending even more aggressively than forecasters, most of them, anticipated,” said George Selgin, an economic policy expert at the libertarian Cato Institute.
“There are some adverse supply shocks going on, some of which affected the April numbers, but the big story is the pent-up demand and purchasing power that people have finally started to dispose of.”
Inflation had widely been widely expected to rise as the U.S. rebounded from the coronavirus recession following a plunge in consumer spending. But the unexpectedly sharp increases in prices have spurred more criticism from Republican lawmakers who have for months questioned the White House and Fed’s handle on inflation.
“There’s never been a time that I know of in history where you have had a significant increase in money supply where you don’t have inflation,” said Sen. Rick Scott (R-Fla.) in an interview with The Hill.
Both White House and Fed officials say that with the U.S. still down roughly 9 million jobs from the onset of the pandemic, the economy is in no danger of overheating. Instead, they argue that the country cannot afford to let up support and risk another sluggish recovery like the multi-year climb out of the 2007-09 recession.
Biden and Democratic lawmakers are attempting to pass trillions in infrastructure…
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