A new forecast shows that the Biden administration expects inflation to be twice as bad in the coming months as it predicted only a few weeks ago.
The Biden administration on Friday revised its projections for the Consumer Price Index inflation rate, which officials now estimate will hit 4.8 percent for the fourth quarter of the year. That is more than double the administration’s initial forecast of 2 percent issued in May, according to The Wall Street Journal.
According to the Bureau of Economic Analysis, the price index for American consumer spending rose at a rate of 4.2 percent in the year ended in July, the hottest pace since January 1991.
Although Federal Reserve Chairman Jerome Powell has been saying that the inflation spike is expected to be temporary, that judgment is being roundly questioned.
“This data shows how rising inflation, caused by Democrats’ reckless government spending, is shrinking budgets for families as the prices of everyday goods continue to skyrocket,” Republican Sen. Rick Scott of Florida said in a statement on his website.
“Now, for the 7th month in a row, prices have increased on everyday goods, making it harder for low and fixed-income families, like mine growing up, to make ends meet. Chair Powell, President Biden and Democrats in Washington need to wake up to this reality and stop wasting American taxpayer dollars as families struggle to deal with the consequences, like skyrocketing inflation,” Scott said.
“We can’t stand by and let these failed policies ruin our country and kill the American Dream.”
Patrick Harker, the president of the Philadelphia Fed, said price hikes that have the effect of blunting any wage increase “may not be so transitory, and that’s a risk I’m worried about,” according to CNBC.
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Harker said businesses in his region “are seeing clear price pressures.”
“What I’m hearing is they’re trying not to pass most of that along to the consumer and customers,” he said, adding, “That said, they are passing some of that along. That’s inevitable. So far people have been understanding. That won’t last forever. At some point, we need to get this under control.”
Mike Kucharski, the owner of JKC Trucking in Summit, Illinois, said prices keep rising with a domino effect throughout the economy.
“The catalyst for skyrocketing prices for food is fuel has gone up, our insurance has gone up, all the costs have gone up, including extra pay for labor,” Kucharski said.
“The stimulus checks are not helping because even as truckers have been working through the pandemic, we’re delivering to warehouses where some of them are taking two, three days to unload because they don’t have the capacity and the workforce,” he said.
“All the extra costs that we get passed onto us, we have to pass down to the customers,” Kucharski said. “Our margins are very small. Everybody’s increasing the costs just to keep afloat and keep the wheels rolling. But it’s affecting the end user, the American people. We’ve passed our going rate on to the shelves.”
Some experts worry that low-income Americans are in for a wallop.
“[H]igh inflation or anything close to runaway inflation is really going to hurt people at the bottom of the ladder,” Atlanta Fed President Raphael Bostic said.
“With global supply chain and logistics bottlenecks looking set to persist into 2022 and labor costs continuing to grow, inflation could prove to be more stubborn than many have been anticipating,” said chief economist Richard Moody of Regions Financial, according to MarketWatch.