Inflation is starting to look like that unexpected — and unwanted — houseguest who just won’t leave.
Suddenly, businesses had to scramble to meet demand. They couldn’t hire fast enough to plug job openings — a near record 11 million in October — or buy enough supplies to fill customer orders. As business roared back, ports and freight yards couldn’t handle the traffic. Global supply chains became snarled.
Furman suggested, though, that misguided policy played a role, too. Policymakers were so intent on staving off an economic collapse that they “systematically underestimated inflation," he said.A flood of government spending — including President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households in March — overstimulated the economy, Furman said.
“The demand side of the U.S. economy will continue to be something to behold,’’ says Rick Rieder, chief investment officer for global fixed income at Blackrock, “and companies will continue to have the luxury of passing through prices." “We need a lot of humility talking about how long this lasts,” Furman said. “I think it’s with us for a while. The inflation rate is going to come down from this year’s blistering pace, but it’s still going to be very, very high compared to the historical norms we have been used to.’’The run-up in consumer prices has raised the specter of a return to the “stagflation’’ of the 1970s.
“Most economists are expecting growth to accelerate in the fourth quarter,” Greene said. “So it doesn’t suggest that we’re facing both a tanking of growth and higher inflation. We’re just facing higher inflation.’’The pressure is on the Fed, which is charged with keeping a lid on inflation, to control prices.
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