Image source: The Hill
On Sunday, President Joe Biden was optimistic about the country’s economy, saying America will be able to rein in the historically high inflation.
He also expressed hope that the Federal Reserve will achieve a “soft landing” by slowing economic growth without entering recession.
“I’m telling the American people that we’re going to get control of inflation,” said Biden on CBS’s “60 Minutes” on Sunday night.
In 2020, US inflation soared to its highest last seen in the early 1980s.
Factors like the pandemic, supply chain snags, and the Russian’s invasion in Ukraine have affected the global economy.
According to the latest Consumer Price Index, the annual pace of inflation started ticking down recently, measuring 8.3% for the year ending in August — the second month of declines.
In June, the CPI hit 9.1% year over year, the highest inflation rate in over four decades.
However, the August CPI report also showed a higher-than-expected month-on-month gain of 0.1%.
Economists were anticipating a fall, and it sent stock prices declining, with the three major US indexes logging their worst day in more than two years.
Biden tried to put out the fire, expressing optimism that the worst may be over, saying:
“Let’s put this in perspective [The] inflation rate month-to-month was just an inch, hardly at all.”
Solutions & price increase
President Joe Biden also emphasized his administration’s gains in the labor market, citing the 10 million new jobs added since he took the office.
He also highlighted his administration’s investments in the semiconductor industry.
“In the meantime, we created all these jobs and prices have gone up, but they’ve come down for energy,” he said.
The declining energy prices have been influential in lowering the overall inflation rate, but price increases for food and shelter remain high.
Economist and Loyola Marymount University Professor Sung Won Sohn said:
“If you look at the underlying trend — I look at labor costs and rent increases — they both are pointing in the wrong direction and going up at hefty paces.”
However, other inflation measures shed a positive light.
A day after CPI, the August Producer Price Index showed consistent declines in the average change of prices paid to producers as supply chain troubles faded and high energy prices finished filtering through the economy.
Regardless, key contributing and detracting inflation factors have been above the control of both Biden and the Fed.
Despite the central bank’s efforts to tighten monetary policy to dampen demand, Fed officials are unable to tackle the supply side, which could keep the pressure on inflation.
This week, the Fed’s policymaking committee is set to meet and determine the next course of action in the battle against inflation.
Economists speculate the Fed will raise the interest rate by 75 basis for the third time in a row.
However, in the fight against inflation, there are concerns that the Fed’s massive rate hikes could bring the country’s economy into a recession.
During the “60 Minutes” interview, Biden said he doesn’t believe the economy will worsen before it improves.
Opinions expressed by NY Weekly contributors are their own.