The surge in consumer goods prices in the U.S. by 6.8 percent, the biggest increase since the 1980s, according to the Department of Labor, is not only worrisome, it raises questions about what caused it and why President Joe Biden is optimistic in the face of shooting cost of food, gas, among others.
Some analysts believe worsening inflation is a result of a battered supply chain caused by the Covid-19 pandemic. Biden agrees too.
According to Biden, inflation will loosen up if the U.S. continues to fight Covid-19 and fixes the supply chain problem. He sees inflation as having reached its peak and would fall.
“I think you’ll see it change sooner, quicker, more rapidly than people think,” Biden said. “Every other aspect of the economy is racing ahead.”
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What the Federal Reserve could do is to cool the economy by gradually decreasing the $120 billion it spends per month on government-backed bonds, which has injected money into the financial markets during the pandemic, Vox reported.
At this point, the economy is very strong, and inflationary pressures are high,” Fed Chair, Jerome Powell said in late November. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
Meanwhile, gas prices have begun to fall. To ease the supply chain problem, the Biden Administration is running the Port of Los Angeles 24 hours a day, to clear the docks so goods don’t wait for days on cargo ships. About 50 million barrels of oil from the US Strategic Petroleum Reserve last month was released in an attempt to reduce gas prices, which have already begun to fall.
