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Biden Administration Feeling the Heat as Inflation Continues to Rise

Michael Ross Greenberg by Michael Ross Greenberg
June 15, 2021
in Politics, Economy, News, Opinion
12 1
0
Home Politics

The past week has seen several ominous economic signals, particularly with respect to rising inflation.

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CNN Business published an article Tuesday pointing to a jump in producer prices for the month of May.

This story comes on the heels of a similar cautionary tale published by CNN Business on June 10,   highlighting that consumer prices during that same period jumped at their highest rate since 1992.

According to the U.S. Bureau of Labor Statistics, consumer prices have soared 6.6% overall from May 2020 to May 2021 with gasoline prices rising 56.2% and global food prices surging 40% over that same period.

Significant price increases were reported in May for popular consumer products from brands such as McDonald’s, Kraft Foods, JM Smucker, Hershey, and Huggies Diapers; most recently the cost of beef shot up 2.3% in the month of May alone.

BREAKING: Inflation SKYROCKETS To Highest Levels Since Great Recession

Consumer prices have skyrocketed abroad as well, as China faces rising prices across the board. Bloomberg reported on June 9 that the Chinese government is considering a cap on coal prices to keep production costs in check.

As the world’s primary manufacturing hub, rising production costs in China will certainly place additional upward pressure on worldwide consumer prices. 

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Last but not least is the housing market. Home prices have a seen a meteoric rise since the beginning of the pandemic with the S&P CoreLogic Case-Shiller 20-city home price index showing a 13.3% annualized increase in March 2021.

Real estate brokerage Redfin reports that approximately half of homes across the United States were selling above the asking price as of May 2021. Lynn Fischer, Deputy Director of the Federal Housing Finance Authority said in her quarterly report for Q1 of 2021,

“House price growth over the prior year clocked in at more than twice the rate of growth observed in the first quarter of 2020.” Despite this overheated housing market, the Fed continues to curb interest rates, adding fuel to the fire by keeping mortgage rates around 3%.

The Federal Reserve and the Biden Administration continue to insist that concerns regarding large-scale inflation are unfounded. 

They contend that recent examples of rising prices are strictly “transitory” in nature, dismissing them as merely a product of a recently reopened economy placing sharp demand increases on atrophied supply chains.

However, that position is becoming increasingly untenable with each passing month.

If producer prices are indeed rising alongside consumer prices, as indicated by CNN Business, the White House and the Fed will find it quite difficult to continue to downplay the inflationary signals. 

The Federal Reserve is scheduled to give a monetary policy update on Wednesday and these issues will no doubt be front and center.

Analysts at CNBC expect to the Fed to “pencil in” a first-rate hike for 2023 and “signal to the market…” its desire to begin tapering its bond-buying program (aka ‘QE2’) at some point in the near future, without committing to a hard date. 

If Federal Reserve Chairman Jerome Powell does indeed signal an intention to begin pulling back on Quantitative Easing at Wednesday’s meeting, the reaction of the markets may tell us a lot about just how “transitory” the inflation issue really is. 

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