Biden Says Fighting Inflation Is ‘Top Priority’ as Prices Bite Consumers

While the White House spent last year downplaying popping prices, arguing that they would fade with the pandemic as roiled global supply chains righted themselves, nearly a full year of high inflation readings have proved too much to ignore. Climbing costs are eating away at paychecks and helping to drive Mr. Biden’s poll numbers to the lowest point so far in his presidency.

“I don’t think that it is going to go away in a way that is going to save the incumbent party by November,” said Neil Dutta, an economist at Renaissance Macro Research. “Even though the labor market is quite strong, it’s not enough to keep pace with the shock people are feeling with respect to inflation.”

The Fed is expected to raise interest rates from near-zero at its meeting this month and officials have signaled that they will then make a series of increases throughout the year as they try to put a lid on inflation.

The central bank sets policy independently of the White House, and the Biden administration avoids talking about monetary policy out of respect for that tradition. But the timing could be politically tricky. The Fed could prompt an economic pullback that coincides with this autumn’s election season, creating a double whammy for the Democrats in which central bank policy is slowing down job market progress even as inflation has yet to fully fade.

That might be especially true if conflict in Ukraine sends fuel prices higher, further stoking inflation and making consumers expect rapid price increases to continue, some economists said.

“The Fed has to be more aggressive on inflation,” said Diane Swonk, the chief economist at Grant Thornton. “It could bleed into the unemployment rate by the end of the year.”

Mr. Furman said that he thought it was more likely that the Fed’s actions would not inflict too much pain this year, though they might begin to squeeze the job market in 2023. And Mr. Dutta speculated that the Russian invasion of Ukraine could slow the central bank down somewhat, at least in the near-term.

Article source: https://www.nytimes.com/2022/03/01/us/politics/inflation-biden-state-of-the-union.html