The jump in prices highlights the drastic changes to the economy from one year ago, when the pandemic unleashed havoc on consumers, businesses, and suppliers and compelled the White House and Congress to authorize emergency spending to tackle the crisis.
But the federal government’s massive spending programs have drawn criticism from some market analysts and Republican lawmakers who have raised concerns about overspending and overstimulating the economy. The hundreds of billions of dollars in relief, they’ve claimed, could trigger long-feared inflation, an argument that critics will likely amplify following the latest data/
The Federal Reserve and the White House, however, have pushed back against those claims, anticipating the uptick in prices. In a blog post on Monday, White House officials said they expect inflation to increase somewhat, but that the main factors driving those upticks, including pent up demand and supply chain disruptions, to subside over time, as businesses regain their footing. After several months of a modest rise, the officials foresee inflation fading “back to a lower pace thereafter as actual inflation begins to run more in line with longer-run expectations.”
In a direct reference to the consumer price index, the officials also noted that the sudden and massive disruptions from last spring will distort annual comparisons, since prices dropped so drastically last year, when the coronavirus first took hold of the economy. They predict that as more time passes from the worst economic period of the pandemic, the spikes in rising price data should flatten.
Despite a surge in hiring and a strengthening economy, Fed officials maintain that the job market is still in rough shape for millions of Americans. The number of people who have been unemployed for more than six months remains above 4.2 million, up from more than 1 million from before the pandemic.
The Fed now expects inflation to hit 2.4 percent this year, up from an earlier estimate of 1.8 percent, but the persistence of unemployment has pressured central bankers to not ease up on emergency measures to repair the economy.
During an interview on CBS News’ “60 Minutes” on Sunday, Fed Chair Jerome H. Powell said that the central bank would not raise interest rates, in an attempt to tamp down the economy, until inflation is moderately above its target rate for a period of time. “We don’t mean just tap the base once,” he said. “We want it to be just moderately above 2 percent. So that’s what we’re looking for.”
The Dow Jones industrial average and the S&P 500 are trading near record levels and more than 900,000 jobs were added last month.