Inflation Near 40-Year High Shocks Americans, Spooks Washington
Already-hot inflation is forecast to climb even further when November data comes out on Friday, to 6.8%. That would be the highest rate since Ronald Reagan was president in the early 1980s -- and in the lifetimes of most Americans.
Higher prices helped deliver a banner year for U.S. business, which is posting its fattest profit margins since the 1950s. But for Joe Biden’s administration and Jerome Powell’s Federal Reserve -– which didn’t see it coming -- the sudden return of inflation, largely dormant for decades before 2021, is looking increasingly traumatic.
It’s likely to drive some big changes in the coming year, as the Fed pivots toward raising interest rates and the president heads into midterm elections with slumping approval ratings.
How did it happen? Essentially, the pandemic made it harder for the world to produce stuff and move it around. The government shored up incomes in the crisis like never before, so households remained eager to spend. And a combination of lockdowns and Covid caution meant their purchasing power was focused on consumer goods instead of services.
Already-hot inflation is forecast to climb even further when November data comes out on Friday, to 6.8%. That would be the highest rate since Ronald Reagan was president in the early 1980s -- and in the lifetimes of most Americans.
Higher prices helped deliver a banner year for U.S. business, which is posting its fattest profit margins since the 1950s. But for Joe Biden’s administration and Jerome Powell’s Federal Reserve -– which didn’t see it coming -- the sudden return of inflation, largely dormant for decades before 2021, is looking increasingly traumatic.
It’s likely to drive some big changes in the coming year, as the Fed pivots toward raising interest rates and the president heads into midterm elections with slumping approval ratings.
How did it happen? Essentially, the pandemic made it harder for the world to produce stuff and move it around. The government shored up incomes in the crisis like never before, so households remained eager to spend. And a combination of lockdowns and Covid caution meant their purchasing power was focused on consumer goods instead of services.
