President Joe Biden and Federal Reserve Chairman Jerome Powell were slow to recognize and act on inflation as it first emerged and continued to rise, the Washington Post reports in "U.S. Policymakers Misjudged Inflation Threat Until It Was Too Late."
Instead, the Biden administration and policymakers were more focused on supplying stimulus to the U.S. economy to counter the pandemic and fortify the labor market, according to the article, which lays out a detailed timeline of events between February 2021 and May 2022.
The nexus of the government's actions created today's "calamity," WaPo says. Inflation began with a booming housing market, rising prices for rental cars, a disrupted supply chain, the Ukraine war and uneven employment and consumer spending.
"Eventually, these one-off developments fused to create a much broader calamity, rattling the economic and political foundations of the country — making clear policymakers had failed to recognize the mounting inflationary crisis."
Instead, President Biden and Chairman Powell dismissed inflation in 2021 as "temporary." U.S. Treasury Secretary Janet Yellen said in June 2021 inflation would hit a mild peak of 3%, just above the Fed’s 2% target.
Finally, in November 2021, policymakers began to recognize the severity of inflation, but Powell maintained that the Federal Reserve could use its tools to keep inflation from becoming permanent. However, Powell did go on record as saying that inflation and supply chain disruptions "will persist" into 2022 and that inflation could cause "sizable price increases in some sectors."
In December, the Fed pivoted from unemployment to inflation, recognizing that it could pose a serious danger to the U.S. economy.
Powell said at the time: "There's a real risk now, we believe — I believe — that inflation may be more persistent. The risk of higher inflation becoming entrenched has certainly increased. I don't think it's high at this moment, but I think it's increased."
Earlier in May, Powell finally conceded: "Inflation is much too high."
With inflation now at 8.3%, near a 40-year high, and the stock markets down sharply in the past two months, Powell and Yellen are scheduled to meet with President Biden today in the Oval Office at 1:15 p.m. EST.
Ahead of the meeting, President Biden published an opinion piece in The Wall Street Journal late on Monday laying out his three-part plan to fight inflation by supporting the Fed, working with energy CEOs to help reduce Americans' utilities bills and lowering the federal deficit.
Biden blamed inflation, as he has before, largely on the Russian war in Ukraine and supply chain disruptions.
As Biden said earlier this month, "I want every American to know that I'm taking inflation very seriously, and it's my top domestic priority."
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