Image source: The Hill
President Joe Biden expressed optimism about the country’s economy on Sunday, saying America will be able to curb historically high inflation.
He also expressed hope that the Federal Reserve will achieve a “soft landing” by slowing economic growth without sliding into recession.
“I’m telling the American people that we’re going to get control of inflation,” Biden told CBS 60 Minutes Sunday night.
In 2020, US inflation hit its highest level since the early 1980s.
Factors such as the pandemic, supply chain problems and the Russian invasion of Ukraine have impacted the global economy.
According to the latest consumer price index, annual inflation has recently started to decline and stood at 8.3% for the year ending August, the second month of decline.
In June, CPI hit 9.1% yoy, the highest inflation rate in four decades.
However, the August CPI report also showed a higher-than-expected increase of 0.1% on a monthly basis.
Economists predicted a decline and stock prices fell as a result, with the three major US indices having their worst day in more than two years.
Biden tried to put out the fire and expressed his optimism that the worst could be over by saying:
“Let’s put this in perspective [The] inflation rate month-to-month was just an inch, hardly at all.”
Solutions and price increases
President Joe Biden also highlighted his administration’s gains in the job market, citing the 10 million new jobs added since he took office.
He also highlighted his government’s investment in the semiconductor industry.
“In the meantime, we created all these jobs and prices have gone up, but they’ve come down for energy,” he said.
Falling energy prices have had an impact on falling headline inflation, but increases in food and housing prices remain high.
Economist and professor Sung Won Sohn of Loyola Marymount University said:
“If you look at the underlying trend – I’m looking at labor costs and rent increases – both are pointing in the wrong direction and are increasing at a good pace.”
However, other inflation measures cast a positive light.
A day after the CPI, the August producer price index showed significant drops in the average change in prices paid to producers as supply chain problems disappeared and high energy prices stopped entering the market’s economy.
Either way, the major factors contributing to and deflecting inflation were beyond the control of Biden and the Fed.
Despite the central bank’s efforts to tighten monetary policy to dampen demand, Fed officials are unable to tackle the supply side, which could keep inflationary pressures low.
The Fed’s decision-making committee will meet this week to determine the next steps in the fight against inflation.
Economists are speculating that the Fed will raise rates by 75% for the third month in a row.
However, in the fight against inflation, there are fears that massive rate hikes by the Fed could push the country’s economy into recession.
During the “60 Minutes” interview, Biden said he doesn’t believe the economy will deteriorate until it improves.