August 12, 2022


Falling prices for gas, airline tickets and clothes gave Americans a little bit of relief last month, though overall inflation is still running at close to its highest level in four decades… Consumer prices jumped 8.5% in July compared with a year earlier, the government said Wednesday, down from a 9.1% year-over-year increase in June. On a monthly basis, prices were unchanged from June to July, the first time that has happened after 25 months of increases.” AP News

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From the Left

The left is cautiously optimistic that inflation has peaked and the economy is on the right track.

“It’s not just falling gasoline prices; business surveys point to declining inflation and supply chain problems are easing… Unfortunately, one month of zero inflation doesn’t mean that the inflation problem is solved. Economists have long known that you get a much better read on underlying inflation if you strip out highly volatile prices — normally food and energy, but there are a variety of measures of core inflation, and all of them are still unacceptably high…

“The Fed might, however, take some comfort from a different report, released Monday: the New York Fed’s monthly Survey of Consumer Expectations, which showed ‘substantial declines in short-, medium- and longer-term inflation expectations.’ Ever since prices took off last year, Fed officials have been concerned that inflation might become entrenched… [But] there doesn’t seem to be any entrenching going on.”

Paul Krugman, New York Times

“The fact that food prices have continued to increase is particularly striking, because, over the past couple months, many of the factors that have been blamed for this phenomenon have gone into reverse…

“Energy prices and transport costs have fallen. So have the prices of many agricultural commodities, including wheat, soybeans, and sugar. Yet food producers such as Kraft Heinz and Mondelez are still raising their prices. One interpretation of this disconnect is that it always takes a while for changes in the prices of commodities to be translated into the price of finished goods. A less benign interpretation is that the big food companies are padding their profits. In either case, though, a sustained drop in commodity prices should eventually lead to lower food prices

“There is little prospect of inflation returning to the Federal Reserve’s target of two per cent anytime soon. And if the war in Ukraine escalates, prompting another surge in oil prices, or a deadlier new variant of the coronavirus emerges and causes more global lockdowns, the recent drop could conceivably reverse itself. But, barring a calamity on that scale, U.S. inflation appears to have peaked.”

John Cassidy, The New Yorker

“The data since the [last Fed] meeting has said consistently that the immediate recession risks have diminished. Strong job growth and the lowest unemployment rate in 50 years say the Fed has even less to worry about on the other part of its dual mandate, which is employment stability. Add positive surprises in forward-looking indicators for manufacturing, services, factory orders, and other data and the Atlanta Fed’s GDPNow model is currently tracking 2.5% GDP growth in the third quarter…

“The market has shifted to expecting 50 basis points at the next [Fed] meeting. That may be the right prediction, but based on the data to date, it would be the wrong policy… Better to be more aggressive now than to have a bigger problem to deal with later.”

Jason Furman, Wall Street Journal

From the Right

The right is skeptical that inflation will soon subside, noting that food prices and core inflation remain high.

The right is skeptical that inflation will soon subside, noting that food prices and core inflation remain high.

“July’s rate was so encouraging largely because of energy prices, which dropped by 4.6 percent… [but] prices continued to rise in virtually every other important economic sector. Food prices are an especially problematic area for Biden. They rose by 1.1 percent last month, making them 11 percent higher than they were a year ago. Inflation was even higher for dairy products (rising 1.7 percent last month) and grain products (1.8 percent higher)…

“Biden’s best course would be to level with the American people and tell them the truth: We will be fighting the pandemic’s effect on the economy for years. But his penchant for quick solutions and soothing harmony means he’s not likely to do this. Instead, he’ll promise quick and relatively painless returns to normalcy that won’t happen…

“Inflation is not going away until its underlying causes go away. That won’t happen quickly, no matter the happy talk coming out of the Oval Office.”

Henry Olsen, Washington Post

“The slip in gas-pump prices comes from drivers cutting back on trips, not an increase in supply: Demand fell to 8.5 million barrels a day, matching the level in July 2020 when the pandemic kept millions indoors… And while gas prices today — $4.15 a gallon, per the Energy Information Agency — may be better than the $5.11 rate in June, it merely means Americans are paying ‘only’ 69% more than when Biden took office, rather than 108% more.”

Editorial Board, New York Post

“This is still the fifth straight month that overall CPI inflation has remained above 8%. Core CPI has been above 5% for ten straight months, and is flattening out around 6% over the last three months…

“Those are not good signs, especially when considering that all of these reports are compounding on high inflation rates from a year ago. Starting in April, the year-on-year comparisons used 2021 inflation rates that were already above Fed target levels, which means that we’re only slowing down in relation to last year’s inflation acceleration.”

Ed Morrissey, Hot Air

“[Wages] will need more than a few good months to catch up with the cost of living. Workers finally regained some ground in July as inflation-adjusted hourly earnings rose half a percentage point, the first increase since last September. But real average hourly earnings are still down 3% in the past year. Add to that a decline in the average workweek since a year ago, and the result is a 3.6% drop in real weekly pay for the average American

“None of this should delay the Federal Reserve from its appointed anti-inflation rounds. Investors took the July inflation news as a sign that the central bank can stop its tightening cycle sooner, and a 75-point rate hike in September is no longer discounted in markets. It’s possible that inflation peaked in June. But the Fed is better off ignoring these hopeful market expectations, lest it ease up and return to the stop-and-start monetary and inflation gyrations of the 1970s.”

Editorial Board, Wall Street Journal

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