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Fight Against Inflation Proves to be Complicated

Inflation rose to 7.5% last month, exceeding the 40-year-high record set in December. Typically, the Federal Reserve would raise interest rates to offset inflation. However, nothing about current inflation levels is typical.

"There's a confluence of factors …," David Wessel, the director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution told NBC News. "There's a lot of things that pushed up demand and a lot that's kept supply from responding accordingly, as a result we have inflation."

Traditional inflation fighting tools may not be as effective since the factors driving up prices are so complex. "Raising interest rates doesn't fix the supply chain. Until we get that resolved, we're not going to be able to fully solve inflation," Brian Riedl, a senior fellow at the Manhattan Institute and a former chief economist for Sen. Rob Portman, R-Ohio, told NBC.

Lowering inflation could be a lengthy battle. President Joe Biden has said a lack of competition in the U.S. market is partly responsible for increased prices, but that will take some time to fix. "The dynamics of the modern American economy — the increased consolidation and lack of competition — has distorted market incentives in important ways," Brian Deese, director of the White House National Economic Council, told the Associated Press. "The president gave us the direction that he wanted us to come back and say what could we do to address this issue of consolidation across industries in a way that would be durable."

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Tuesday, 28 May 2024

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