Inflation worries have been making global news every day recently, so let’s break down what’s been going on.
More details🧐 The U.S. Consumer Price Index rose 6.2% in October from a year earlier, its biggest one-year jump in 31 years. That is bad news for U.S. President Biden & the Federal Reserve.
Why is it bad news?🤔 One of the Fed’s, & Central Banks in general, key jobs is to keep price growth stable. The Fed had said to expect higher inflation in the near term as the economy gets back to normal, dubbing it “transitory inflation”.
What is transitory inflation?🤷♀️ Transitory simply means temporary, although exactly how long “temporary” means is unclear. Fed Chair Jerome Powell said that “it will not leave behind permanent or persistently higher inflation.”
This led to a wave of criticism on the Fed’s claims.
Inflation isn’t transitory, but the Fed’s credibility is🗣 “It is not transitory,” said Mohamed El-Erian, chief economic advisor at Allianz. “I think the Fed is losing credibility,” El-Erian said
“Companies are charging higher prices [and] there’s more to come. Supply disruptions are lasting for a lot longer than anybody anticipated. Consumers are advancing purchases in order to avoid problems down the road — that, of course, puts pressure on inflation,” El Erian said.
He said that people shouldn’t forget that those on low incomes are the ones hardest hit by rising consumer prices.
