You see it every time you go to the store, book a vacation or order something online. Inflation continues to persist after nearly two years, with the annual inflation rate still well above six-percent, far short of the two-percent target of the Federal Reserve. While the short-term numbers have shown some improvement in recent months, experts agree it is going to take much longer to get out of this inflationary cycle. Federal Reserve Chair Jerome Powell this week cited progress on bringing down inflation, but warned "the road is long."
Part of solving inflation is agreeing on what caused it in the first place. That has been a problem so far, with Democrats trying to blame it on greedy corporations and price-gouging, and President Biden even falsely claiming he inherited high inflation. Experts say otherwise. "I would go back to the government shutdowns, COVID policies, and fiscal expenditures---a lot of government spending---those are the primary drivers of the mess that we've made with prices," says Norbert Michel, economist with the CATO Institute.
Michel tells KTRH there is no quick fix to getting out of inflation numbers like this. "Even though the month-to-month inflation rate has come down a bit, prices are still elevated compared to what we were used to before," he says. "Those annual inflation numbers are up so high because of that initial runup, and they're not going to go away...the annual inflation numbers are going to stay inflated, no matter what, for a few more months at least."
That is not to say he doesn't see reason for some hope on the horizon. "We're still seeing a very strong labor market," says Michel. "I think those month-to-month (inflation) numbers are going to continue to flatten out, and I don't see an economic calamity as long as that continues."
Michel's prediction is also based on Congress reining in the out-of-control spending we've seen over the last two years. "Hopefully, that (omnibus bill) will be the last one of those kinds of bills," he says. "But if Congress continues to do that, and pass those large spending bills, that would change my optimism."