Sun Sentinel Palm Beach Edition
Inflation spike jolts Biden’s agenda
Pace of price rise over last 12 months is fastest since 1990
Consumer prices surged at the fastest pace in more than three decades in October as fuel costs picked up, supply chains remained under pressure and rents moved higher — bad news for economic policymakers at the Federal Reserve and for the Biden White House.
Overall prices rose by 6.2% over the past 12 months, the fastest pace since 1990, and inflation began to accelerate again on a monthly basis.
Inflation jumped to 0.9% last month from September, a Labor Department report showed, faster than the prior month’s increase of 0.4% and well above economists’ expectations. So-called core prices, which strip out products like food and fuel, also climbed more quickly.
Rising prices could be seen across the board in October, at grocery stores and restaurants and car dealerships. The acceleration eliminates a White House talking point: Top Biden administration officials had regularly pointed out that while price gains were faster than usual, they were slowing down from rapid summertime readings. It also poses a challenge for the Fed, which is charged with maintaining stable prices and fostering maximum employment.
Instead of cooling off toward the end of 2021 as many policymakers had expected, inflation rates remain far faster than the 2% annual gains the Fed aims for on average over time.
On Wednesday, President Joe Biden acknowledged the ongoing price rise, saying in a statement that “reversing this trend is a top priority for me,” before departing Washington to tour the Port of Baltimore
for the start of what is likely to be a national tour to showcase the $1 trillion infrastructure legislation that cleared Congress last week and that he intends to sign Monday.
During remarks at the port, he acknowledged that consumer prices remained “too high.”
“Everything from a gallon of gas to a loaf of bread costs more,” he said. “We still face challenges and we have to tackle them ... we have to tackle them head on.”
“Many people remain unsettled about the economy and we all know why,” Biden said.
He offered his infrastructure plan as the solution, albeit one that will take time to manifest. Better infrastructure whether roads, bridges, ports or whatever would give more capacity and resiliency for the supply chain. There would be more capacity to unload ships and move goods, which in turn would reduce price pressures and shortages.
Biden said the infrastructure spending would create jobs paying $45 an hour, nearly 50% above the current national average. It would create a wealth of jobs to fix aging pipes, bridges and roads, and boost clean energy and cybersecurity. And most wouldn’t require college degrees.
“This is a once in a generation investment,” he said.
Biden pointed to Baltimore’s port as a blueprint on how to reduce shipping bottlenecks that have held back the economic recovery.
The port in Baltimore is adding container cranes as well as a 50-foot berth where ships can be unloaded. Baltimore’s port is also benefiting from grants to upgrade the Howard Street Tunnel, a brick-lined underpass for trains that opened in 1895. The tunnel would be expanded so that shipping containers could be double-stacked on railcars, making it easier to move goods out of the port.
Administration and Fed officials alike have maintained that rapid inflation should eventually fade. But they have had to revise how quickly that might happen: Supply chains remain badly snarled, and demand for goods is holding up and helping to fuel higher prices. As wages begin to rise in many sectors amid labor shortages, there are reasons to expect that some businesses might charge their customers more to cover climbing worker costs. October’s data did nothing to alleviate that worry.
Many factors pushed inflation higher last month. Used and new car shortages have sent prices skyrocketing, supply chain issues have made furniture costlier, labor shortages are raising some service-industry price tags, and rents are rising after a weak 2020. In the headline data, food and fuel prices picked up sharply.
The reality that inflation is broadening — and spreading to slow-moving categories like rent rather than staying confined to pandemic-disrupted ones like imported electronics and airplane tickets — could unsettle Fed policymakers, because it increases the risk that price pressures could last.
Officials have avoided overreacting to an inflation surge driven by supply chain problems, worried that doing so would hurt the economy unnecessarily. If the current trends persist, they will likely come under growing pressure to hasten their plans to pull back economic support by ending their stimulative bond buying program and raising interest rates sooner and more quickly.