Money & The Economy

Despite Cooling Inflation, The Fed Likely Won’t Declare Victory

Despite signs that inflation may be easing, the Federal Reserve is unlikely to declare victory as a key inflation metric remains near four-decade highs, according to Forbes Tuesday.

Producer prices rose 8% on an annual basis in October, following an 8.4% increase in September to post the smallest annual increase since July 2021according to the Bureau of Labor Statistics. However, with inflation still four times higher than the Fed’s target of 2% per year and near record highs, the central bank is unlikely to halt or reverse its campaign of interest rate hikes designed to combat inflation, according to Forbes.

“As far as recession is concerned, every time inflation has reached these levels, an economic contraction has always followed,” Heritage Foundation economist E.J. Antoni told the DCNF. “This is no exception.”

Former CEO and founder of Amazon Jeff Bezos advised consumers to avoid expensive purchases to keep “dry powder” in case of an economic downturn, according to CNN Monday. Despite the relative strength of the jobs market, manufacturers saw more than 20,000 job cuts in October, a sign that the broader labor market is weaker than strong performance in the service sector may otherwise indicate, Antoni previously told the DCNF.

“When you look at the inflation numbers, there’s some evidence that we’ve peaked, but are we coming down quickly?” Chief Economist Steven Ricchiuto of investment bank Mizuho Americas told CNN. “These aren’t the types of things that tell the Fed to stop tightening rates,” but they may signal that the Fed does not need to continue at its current aggressive pace, said Ricchiuto.

“Today’s Producer Price Index (PPI) shows that inflation is still hitting small businesses just as hard as consumers. Year-over-year, core PPI has increased by 6.7%, reducing the already slim profit margins of small businesses,” said Job Creators Network President Alfredo Ortiz, in a statement to the Daily Caller News Foundation. “Policymakers can help the Federal Reserve in its fight to reverse inflation by cutting government spending. Pulling our economy out of decades high inflation isn’t a partisan issue. It’s vital to the success of America, and the Biden administration needs to take it seriously.”

President Joe Biden took a more optimistic tone, stressing that food prices had declined, in a press release Tuesday. The cost of final demand foods was up 12.7% on an annual basis in October, compared to 11.9% in September, with fresh fruits and vegetables up by 34.5% and 45.8% respectively on an annual basis, while fish and beef declined 4% and 15.9% respectively, according to the Bureau of Labor Statistics.

“The bottom line is this: my economic plan is showing results, and we face global economic challenges from a position of strength,” Biden said in the press release. “As I said last week, it will take time to get inflation back to normal levels—and we could see setbacks along the way—but we will keep at it.”

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