December 14, 2022


Inflation in the United States slowed again last month in the latest sign that price increases are cooling despite the pressures they continue to inflict on American households. Consumer prices rose 7.1% in November from a year ago, the government said Tuesday. That was down sharply from 7.7% in October and a recent peak of 9.1% in June. It was the fifth straight decline… ​​On Wednesday, the Fed is widely expected to raise its benchmark rate by a half-point, its seventh hike this year.” AP News

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From the Left

The left is optimistic that inflation is slowing, and urges alternative measures other than raising interest rates.

“[The Fed’s theory] is that $3 trillion of anti-recession spending, especially the $1.9 trillion American Rescue Plan, overstimulated the economy and generated price pressures. Research has demonstrated that this claim is wrong… Most of the economy’s bottlenecks were the result of various pandemic disruptions, interacting with global supply systems that were too fragile to begin with…

“When China took extreme anti-COVID measures, that disruption crimped its export of vital manufacturing inputs. Russia’s war on Ukraine only added to the disruption and the global price pressures, especially in energy and food. Shortages of specialized items such as chips needed in auto manufacture cut the supply of new cars… It is preposterous to imagine that higher interest rates would reduce spot shortages in specialized chips, or would cause more oil to flow, or more shipping containers to materialize, or end a war…

“Europe’s inflation rate, at 11.5 percent in October, was far higher than ours. But Europe didn’t have anything like the nearly $3 trillion of anti-recession stimulus of the United States.”

Robert Kuttner, American Prospect

“Corporate profits surged to a record high of $2.08tn in the third quarter of this year, even as inflation continued to squeeze workers and consumers. Over the last two years, quarterly profits have ballooned more than [80%], from around $1.2tn to more than $2tn…

The government should use other means [besides rate hikes] to tame inflation. Like what? Like windfall profits taxes – as California’s governor, Gavin Newsom, has proposed for oil companies there, and Representative Ro Khanna and Senator Sheldon Whitehouse have proposed nationally (taxing the difference between the current price of oil per barrel and the average cost between 2015 and 2019). Like tough antitrust enforcement aimed at reducing the pricing power of big corporations… Like a new antitrust law that allows enforcers to bust up big corporations.”

Robert Reich, The Guardian

Some argue, “To an economist, the inflation rate is the rate at which over-all prices are going up relative to a year ago. In June, this rate was 9.1 per cent; in November, according to the new C.P.I. report, it was 7.1 per cent. That’s a clear improvement… Consumers, however, tend to think more in terms of price levels than rates of change… Consumers want to see prices coming back down, not merely levelling off… Rather than overcorrecting for its failure to predict the earlier price spike, the Fed should be mindful of this as it decides how to set policy in 2023.”

John Cassidy, New Yorker

From the Right

The right cautions that inflation remains high, and urges the Fed to continue raising rates.

The right cautions that inflation remains high, and urges the Fed to continue raising rates.

“The Bureau of Labor Statistics reported a year-over-year hike in the price of food of 10.6%, electricity 13.7%, fuel oil 65.7%, new vehicles 7.2%, transportation 14.2%. Even with nominal wage gains, that means Americans’ average net earnings are down a seasonally adjusted 1.9% since November 2021. Inflation is only ‘better’ because it’s compared to the terrible 9.1% the Consumer Price Index rose in June…

“Nor do November’s slightly slower price hikes guarantee inflation will continue to ease. Biden, recall, spent most of last year claiming the ‘temporary’ increase would ease long before now, and even pretended it had fully disappeared this summer: ‘Our economy had 0% inflation in the month of July,’ he claimed…

“Biden still pretends his policies had nothing to do with this mess, though top Democratic economists warned his American Recovery Act could trigger major inflation.”

Editorial Board, New York Post

“Inflation compares the prices of today — well, last month — to the prices of twelve months earlier. But the surge in prices started in spring 2021, so today’s prices are being compared to the already-higher prices of November 2021. In other words, we’re well into our second year of inflation, which makes those slight reductions in the rate of increase look even more modest…

“The CPI ticking down a few tenths of a percentage point represents very, very modest progress in bringing down the rate of inflation. No one can feel any of that at the grocery store or car dealership or Home Depot…“The current conventional wisdom is that inflation will continue to decline, and that it will have cooled by the end of 2023 — meaning Americans will have endured between two-and-a-half and three years of absolutely brutal price increases before all is said and done.”

Jim Geraghty, National Review

“The Fed’s monetary tightening is making a difference. Yet a 7.1% increase in prices is still a long way from victory, and inflation continues to be sticky across much of the economy… All of which suggests the Federal Open Market Committee (FOMC) has good reason to stick to its leaked intention to lift rates by another 50 basis points on Wednesday…

“The Fed’s temptation will be to think that slower growth can do the heavy anti-inflation lifting. But the challenge for the Fed isn’t getting inflation down merely to 4% or 5% as a new baseline for the next interest-rate cutting cycle. ​​Then inflation will rise again. The better policy is to break inflation now and return sooner to the Fed’s target of 2%. That’s a stronger foundation for growth and a rising standard of living for workers whose budgets have been savaged by inflation.”

Editorial Board, Wall Street Journal

A libertarian's take

“It's also worth keeping in mind, as The New York Times highlighted this week, that many economists were predicting inflation had peaked at this time last year. Boy, were they wrong. Bloomberg's monthly survey of economists said in December of last year that core inflation would fall to 2.5 percent by the end of 2022. Now, that same group says inflation will fall to 3 percent by the end of next year. That's a good reminder that predictions don't count for much. Even though the inflation trend is pointing in a positive direction for the first time in a while, the economy isn't out of the woods yet.”
Eric Boehm, Reason

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