Inflation Stubbornly Rages On

By SBE Council at 10 November, 2022, 2:40 pm

by Raymond J. Keating – 

Periods of high inflation also wind up being times of volatile inflation from month to month. For good measure, inflation is a difficult monster to tame, as substantial price increases get ingrained in the expectations of businesses and consumers. We’re seeing evidence of each of these phenomenon currently.

First, as reported by the U.S. Bureau of Labor Statistics, Consumer Price Index (CPI) inflation came in at 0.4 percent in October. That was the second consecutive month at 0.4 percent. As noted in the following chart from the BLS, these increases came after inflation was essentially flat in July and August.

Of course, inflation has been raging since early 2021. So, for those who hoped that July and August pointed to inflation coming under control, the last two months proved disappointing, with inflation running at nearly 5 percent on an annualized basis.

Second, this two-month recent resurgence in inflation, if you will, also serves as an indicator of inflation being, again, a stubborn monster to bring under control.

At the same time, for those looking for something positive to take away from this latest report, the latest two-month and four-month measures of inflation are down markedly from what registered from February 2021 to June 2022.

In the end, though, this latest report points to inflation stubbornly raging on.

At the same time, policymakers are doing little productive to move things in a the right direction. A positive policy agenda would work against inflation, which, to varying degrees, is the result of too much money chasing too few goods. Therefore, the Fed would need to focus exclusively on reining in the unprecedented loose money it started way back in the summer of 2008, while Congress and the White House turn to a pro-growth agenda, including substantive tax and regulatory relief, free trade, and restrained government spending.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.