The inflation crisis that has been growing for months, raising prices on everything from gas to Thanksgiving dinner, just got more real. This week, the Labor Department reported the Consumer Price Index rose 6.2% in the past year, the highest annual increase since 1990. Even President Biden, who for months has downplayed the i-word while touting other aspects of the economy, was forced to acknowledge the elephant in his administration's room. "Reversing this trend" of inflation is a "top priority," Biden said in response to the new numbers.
But reversing the trend will prove difficult, barring a major shift in policy. Peter Morici, economist and business professor at the University of Maryland, says this is now well beyond a trend. "Consumers, households, people who have to balance their budgets, are expecting six percent inflation this year, and they don't expect it to abate," he tells KTRH.
"Expectations are becoming embedded, and once that happens people start planning on it," Morici continues. "The chairman of GE recently said this is getting structural...What that means is businesses start planning on annual price increases to compensate. So when you go from 1.5 percent to 3 percent, it's very tough to go back down to 1.5 because it gets built into the system."
While Biden's policies have thrown gasoline onto the inflation fire, Morici places much of the blame on Federal Reserve Chair Jerome Powell for failing to take any meaningful action to slow this down. "If you look at the history of the great inflation of the late 70s into the early 80s, the chairman of the Fed at the time made the very same kinds of arguments that Mr. Powell is making now," he says. "Unfortunately, (Powell) seems to not be listening to a variety of opinions on the economy, and the same thing is going on at the White House."
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