Inflation. Kevin Dietsch/Getty Images
The smartest insights and analysis from all perspectives, summarized from across the web:
The time for debate is over, the Financial Times said in an editorial: The Federal Reserve must focus on getting inflation under control. Prices rose a staggering 9.1 percent year-on-year last month, hitting a 40-year high. Until recently, one could hope for a soft landing, a modest slowdown that would “tame the inflation problem and return the economy to robust growth without too much pain.” Now, however, “the choice seems simple: raise rates quickly.” Taking bold moves now, even if they mean a recession, is better than letting inflation spiral into a “vicious cycle.” If the Fed acts too quickly, “it’s easier to reverse course by easing monetary policy than it is to embark on an inflation problem that has seeped into the groundwater.”
Sticker shock is everywhere, Leslie Patton told Bloomberg. Gasoline and milk prices get the most attention, but “the price of a pound of white bread in the US hit a record $1.69 in June, up 12 percent from a year earlier.” Higher food bills are starting to drive demand with food giants like PepsiCo and Conagra reporting falling sales volumes. “I feel like the month has just started and I’ve already spent $650 on groceries,” said Krista Hoffman of Brownsburg, Indiana, who says she’s been cutting out items like juice boxes and planning more meatless meals. Inflation optimists can disregard the numbers for food and energy, which tend to be very volatile, said Justin Fox, also in Bloomberg. But even more worryingly, the “core inflation” that eliminates these prices is “clearly accelerating.”
Wait a minute, Paul Krugman said in the New York Times. The Fed has already taken action to curb inflation. It takes time for rate hikes to affect inflation — longer than the “close three to four months” we’ve had since the central bank began raising rates in March. One would think that the June inflation report would have rattled the markets. However, markets largely “shrugged” off the news. Why? Because the markets are seeing signs that inflation is easing that haven’t made the headline data points, and the message they’re sending is don’t panic. Financial markets say that “inflation is not actually out of control, although the pain many consumers are feeling right now is.” In fact, the greatest danger may be that the Fed “gets intimidated into raising rates too much and triggers an unnecessary recession.”
The story goes on
How bad is it really? asked Derek Thompson in The Atlantic. A widely cited University of Michigan index found that Americans’ prospects for the economy have fallen to their lowest level in 70 years. But many people “seem to be having a great time. Leisure traffic is so heavy that airports can hardly keep up.” Restaurants are full and hotel occupancy is back to normal. We seem to have taken on an “everything is horrible but I’m fine” mentality. That could mean things are better than the numbers show. Or, much worse, that Americans “feel intuitively that a recession is coming, and that’s their final thrill.
This article was first published in the latest issue of The Week magazine. If you’d like to read more of it, you can try six issues of the magazine risk-free here.
You may also like
Colbert’s Late Show angers Fox & Friends for selectively ignoring Secret Service lyrics deleted from Jan. 6
Venue cancels sold-out Dave Chappelle show after backlash
Liz Cheney calls out the “50, 60, 70 year old men” who hide “behind executive privilege.”
Comments are closed.