The last batch of inflation news that Federal Reserve officials will see before their meeting next week is in, and none of it is very good.

Key Points

  • Commerce Department indexes that the Fed relies on heavily for inflation signals showed prices continuing to climb at a rate still considerably higher than the 2% annual goal.
  • The stubborn inflation data raised several ominous specters, namely that the Fed may have to keep rates elevated for longer or even have to hike at some point.
  • Thus far, the economy has managed to avoid broader damage from the inflation problem, though there are some notable cracks.
  • @RustyEarthfireEnglish
    3•8 months ago

    It’s a long-standing observation of economists that government spending leads to inflation. Probably the simplest model is that the government is increasing demand without increasing supply.

    Note that in this model, taxes have a deflationary impact because they reduce demand from individuals.

    This is not an opinion on how much government spending is affecting current inflation (nor how much inflation is to blame for any particular category of goods).