According to a Wednesday report sent out by the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) spiked by 9.1% between June 2021 and June 2022, which means that inflation once again has managed to shatter records.
These recently reported year-over-year inflation numbers managed to shoot past the estimate of 8.8% that was put out by the Dow Jones.
The term inflation refers to the total percent change in the costs of goods over a set period of time. The CPI keeps track of a hypothetical group of goods and services that, together, represent the typical spending of an American Household. Increases in the price level that end up outpacing the increases in wages would imply that Americans are spending a larger portion of their income on goods and services.
For the period of June 2021 to June 2022, the overall cost of food saw an increase of almost 10.4%, the price of new cars went up by 11.4%, and the cost of energy went up by 41.6%, as reported by the Bureau of Labor Statistics.
“Enormous deficit spending of $2.5 trillion just in FY2021 and the first 8 months of FY2022 has meant more money chasing goods,” explained Peter St. Onge, a research fellow from the Heritage Foundation. “That federal spending competes with households, driving up prices by bidding away resources for government projects.”
Earlier this week, the Biden administration prepared itself for the horrible inflation news but attempted to argue that the price data from June is somehow outdated because of the possible lessening of inflationary pressures, especially due to reduced gas prices. While it is true that the prices at the pump have gone down over the past couple of weeks once they broke the $5.00 per gallon level back near the start of June. As of Wednesday morning, the national average in regard to gas sat at $4.63, as reported by AAA.
“We expect the headline number, which includes gas and food, to be highly elevated, mainly because gas prices were so elevated in June,” explained White House Press Secretary Karine Jean-Pierre to the gathered press on Monday morning. “The President’s number one economic priority is tackling inflation. And looking ahead, there are a number of reasons why we expect those high prices to ease over the coming months.”
Despite everything, comments from the White House that were issued near the start of June posited that the United States economy was actually quite strong. “And so, we feel, here at this administration and other experts as well… we feel that we are in a good position to take on inflation. We are in a good position to really start really working on lowering prices.”
In order to deal with the increased rates of inflation, the Federal Reserve is discharging government bonds on its balance sheet and forcing the interest rate up, most recently via 0.75% increments that are being seen as one of the boldest moves in the past three decades as a way to assist in the lowering of inflation. The goal of the central bank is to put the interest rate somewhere between 1.5% and 1.75%.
It was stated by St. Onge that such loose monetary policies would end up having lagging effects. “Even if lockdown distortions end, new money is being printed at a rate nearly 50% higher than pre-pandemic,” he explained. “Meanwhile, since COVID began the money supply has been expanded by 40%. Most of that excess money was saved due to pandemic fear, but as savings normalize and flood back to spending it could, like a golf ball in a snake, drive prices yet higher.”