The Real Reason Inflation Won't Ever Come Down
Inflation Concerns
Former White House Council of Economic Advisers Chairman Kevin Hassett unpacked the issue of affordability during an interview on Fox.
His concern over inflation goes back to last week when he penned an article for Capital Matters. In this article, he questioned why markets seemed to be pricing in inflation.
Now, Hassett feels certain inflation will likely become so unpopular by next year that it will eventually cause a downturn.
Economist's View on Inflation
According to Hassett:
- The Fed poured massive stimulus into the economy.
- The Biden Administration is spending trillions more.
- As a result, inflation will trend upwards.
Hassett is not alone in this thinking. Many economists believe that inflation will continue to be a problem for the foreseeable future.
The Fed's Role in Inflation
The Federal Reserve (Fed) has a dual mandate for price stability and full employment.
In recent years, the Fed has been focused on achieving full employment.
However, the Fed is now starting to shift its focus to price stability.
The Fed is expected to raise interest rates several times this year in an effort to combat inflation.
The Biden Administration's Role in Inflation
The Biden Administration has proposed a number of policies that could increase inflation.
For example, the Administration has proposed:
- Increasing the minimum wage.
- Expanding the social safety net.
- Investing in infrastructure.
These policies could all lead to higher prices for goods and services.
The Impact of Inflation on Consumers
Inflation can have a significant impact on consumers.
When inflation is high, the value of money decreases.
This means that consumers can buy less with the same amount of money.
Inflation can also lead to higher interest rates, which can make it more expensive to borrow money.
The Impact of Inflation on Businesses
Inflation can also have a significant impact on businesses.
When inflation is high, businesses have to pay more for raw materials and labor.
This can lead to higher prices for goods and services.
Inflation can also make it more difficult for businesses to plan for the future.
Conclusion
Inflation is a complex issue with no easy solutions.
The Fed and the Biden Administration will need to work together to find a way to control inflation without damaging the economy.
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