You may remember that former Treasury Secretary Larry Summers warned that President Biden’s big-spending agenda would lead to sustained inflation in February.
White House Officials Worried
While publicly, White House officials are still saying that inflation is only temporary, they are beginning privately to worry that Summers was right. If Summer was correct, economic recovery from the pandemic might be slow in happening.
Consumer Price Index Spikes
The Consumer Price Index rose 5.8% in May, the latest month released. It was the third straight month that this percentage had risen. Furthermore, this increase is the largest on record since 2008.
As prices continue to soar even above Wall Street expectations, some think that the Federal Reserve may have to act quickly to stop prices from going up even more.
Federal Reserve Bank
Federal Reserve Chairman Jerome Powell continues to publicly say that he thinks that inflation will only be temporary as bottlenecks in some industries get resolved. In front of Congress, Powell noted that his agency would not act to stop temporary price increases.
Summers contends that several factors, including the housing market, labor market tightness and asset prices, indicate that the White House’s temporary inflation may last several months. Officials within the White House are saying that they are watching the rates of Treasury Bonds for signs of what Wall Street thinks, and those rates have not changed noticeably.
White House Says Bumpy Road Ahead
White House officials continue to contend that inflation rates will stop rising as bottlenecks resolve and consumers return to normal buying habits. While that may be true, many consumers and business owners wonder if they will be able to survive until that time arrives.