Inflation rose in June with CPI up 5.4%
The Fed is targeting annual price gains of 2% on average over time, a target it sets using a different index. Still, the CPI is closely watched as it comes out faster than the Fed’s preferred gauge and is feeding into the privileged number, which has also accelerated.
Republicans have pointed to the rapid price gains as a sign of the Biden administration’s economic mismanagement and an argument against the kind of additional spending President Biden has requested as part of his $ 4 trillion economic program. , including investments to tackle climate change, strengthen education and improve child care.
“Bidenflation is growing faster than paychecks, wiping out workers’ wage gains and leaving American families behind,” Republicans from the House Ways and Means Committee said in a press release following the report on the data.
The talking point proved powerful because recent strength in inflation outstripped the recovery that many officials had expected. In Mr Biden’s official budget request, released this spring, officials predict an inflation rate that has remained close to historical averages for 2021 and has never exceeded 2.3% per year for a decade. Administration officials have now started to recognize that higher inflation could stick with the economy for a year or two.
The possibility that inflation will not subside as quickly or as much as expected becomes a defining economic risk for the time. Signs that strong demand could support prices, at least for a while, abound. A New York Fed survey released on Monday showed that consumers expect to keep spending solidly in the coming year.
Some members of the business community see the pressure on prices continuing.
Hugh Johnston, chief financial officer of PepsiCo, told analysts on Tuesday the company expected more inflationary pressures via higher costs for raw materials, labor and freight. âAre we going to set prices to deal with it? We certainly are, âhe said.
Jamie Dimon, managing director of JPMorgan Chase, told analysts on a conference call Monday that âit will be a little worse than the Fed thinks. I don’t think it’s all going to be temporary. But it doesn’t matter if we have very strong growth.