The PCE index hit its highest level in November since 1982

It is extremely important that the 2021 price spike teaches households to expect inflation to rise in the future. From the Fed’s perspec...


It is extremely important that the 2021 price spike teaches households to expect inflation to rise in the future. From the Fed’s perspective, there is a risk that rising inflation expectations will trigger an upward spiral in wages and prices, as people seek larger increases to cover rising costs.

For the Biden administration, inflation worries threaten to upset voters, who are unhappy about paying more to get by.

“It’s a devastating thing for working class and middle class people,” Biden said said to the white house Tuesday, adding: “It really hurts.”

And each high inflation data point provides new ammunition for Republicans, who blamed the administration’s March 2021 pandemic relief and stimulus package for helping fuel the price hike by giving households money. money to spend. Inflation fears have already helped derail much of Mr. Biden’s economic agenda, with West Virginia Democrat Senator Joe Manchin III, saying sunday he couldn’t support the president’s $ 2.2 trillion social safety net, climate and tax proposal.

Part of the inflation surge this year is related to demand.

U.S. households have amassed an estimated $ 2.5 trillion in savings, as lockdowns kept them at home and out of stores – and thanks to government stimulus checks, more generous tax credits and allowances. Unemployment widened under the Trump and Biden administrations – helping to fuel robust spending.

But one of those government programs, the expanded child tax credit, is set to expire, and other key income supplements are already depleted. This will at least make some people and families more vulnerable next year. And while many economists believe rising wages and existing savings will continue to fuel spending, it could be complicated if many people lose their jobs because of Omicron.

At the same time, much of the inflation in 2021 came from supply chain issues.

In 2020, consumers started ordering sofas, video game consoles, and cars as the pandemic changed their lifestyles and made them spend less on restaurant meals and travel. The shift towards goods and away from services has overloaded factories, container ships and ports.

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Newsrust - US Top News: The PCE index hit its highest level in November since 1982
The PCE index hit its highest level in November since 1982
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