Inflation has surged to its highest level in four decades, wreaking havoc on American consumers, wiping out pay gains, and confirming the Federal Reserve’s resolve to hike borrowing rates across the board.
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Consumer prices rose 7.5 percent this month compared to a year ago, according to the US Labor Department, the largest year-over-year increase since February 1982. Shortages of goods and workers, large amounts of federal help, ultra-low borrowing rates, and strong consumer spending all conspired to drive inflation higher in the past year.
Inflation was 0.6 percent in December and January, the same as the previous month and higher than economists had predicted. From October to November, prices increased by 0.7 percent, and from September to October, they increased by 0.9 percent.
Since the US Labor Department’s announcement on February 10, there have been some strong reactions coming in from experts.
Having lost control of the narrative on inequality and inflation, the #Fed faces further damage to its reputation due to their interaction:
The most vulnerable segments of our society are being hit hard by #inflation and also face the risk of an income shock due to a policy error— Mohamed A. El-Erian (@elerianm) February 10, 2022
Even if a more aggressive #Fed sends stocks into a bear market and tips the economy into recession, the #inflation problem will actually get worse. Growth doesn’t cause inflation and recession won’t cure it. A weaker economy will actually result in stronger inflation! Got #gold?
— Peter Schiff (@PeterSchiff) February 11, 2022
7.5% inflation and 0% interest rates! You would think it is an emerging market with poor institutional governance. It is the United States of America ( USA)! In 2013 India paid the price for its ‘taper tantrum’. When US sneezes,world catches a cold. Not this time please, Mr. USA.
— Uday Kotak (@udaykotak) February 11, 2022
Best way to cure inflation? Recession. Yield curve getting close to inverting and making the call – 2s/10s less than 50 basis points away and 5s/10s within 10 basis points. Never mind bonds – things are getting very interesting for the stock market. Will the bulls fight the Fed?
— David Rosenberg (@EconguyRosie) February 10, 2022
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