What about the Inflation Reduction Act Biden signed this week? Oh, wait, that had nothing to do with reducing inflation.
In a report out this week from the New York Times looking over the notes from the Federal Reserve’s July meeting, there’s some bad news for Biden’s recent “hot streak” and the premature celebrations by Democrats over their midterm prospects.
The short of the story is that inflation is high and according to the Fed, it’s going to be “uncomfortable high” for a good long period of time despite ongoing efforts to try and drive prices down:
Minutes from the Fed’s July meeting, which were released Wednesday, suggest the decision will depend on economic data released in the coming weeks, including reports on inflation and jobs.
But as of their July meeting, policymakers continued to express concern about rapid price increases.
“Participants agreed that there was little evidence to date that inflation pressures were subsiding,” according to the minutes. “They judged that inflation would respond to monetary policy tightening and the associated moderation in economic activity with a delay and would likely stay uncomfortably high for some time.”
As a result, Fed officials said they remained committed to moving to a “restrictive stance of policy” — meaning raising rates high enough that they meaningfully slow the economy.
That’s Biden’s hot streak right there. Taking a victory lap for a split-second of bad news coated with good news and then acting like your policies are making the economy better.
Voters are in a stagnant state of August vacationing right now but come September, the tables will turn on Biden once again when the ongoing bad inflation news outweighs any semblance of success from the so-called “Inflation Reduction Act.”
The bottom line from the Federal Reserve is that as inflation remains a wild beast, interest rate hikes will continue in the foreseeable future meaning the economy will slow down as a result. The Biden recession is still happening but it’s happening in slow motion and it’s happening for a reason.
Keep in mind, however, that this is the same Federal Reserve that scoffed at inflation as “transitory” last year while they played it down as a non-story:
When consumer prices began rising rapidly last year, Mr. Powell and his colleagues initially dismissed the phenomenon as “transitory,” the effect of the reopening of the economy as the pandemic restrictions eased. Instead, prices continued to rise as demand remained strong and supplies of both workers and goods struggled to keep up.
Late last year, policymakers indicated they no longer viewed inflation as transitory and would begin moving to bring it to heel.
Because they failed to act when the warning signs were flashing bright red, it’s now going to be harder and more painful to rip the bandaid off and try to bring inflation back in line with historical norms.
Whatever Biden’s team thinks is happening with regard to the White House’s efforts to quell inflation or at least flip the narrative, the fundamentals simply don’t support it and won’t support it for quite some time.
Bidenflation is here to stay for a good long time like an unwanted house guest that simply won’t leave and keeps eating all the cookies and stealing from your wallet when you’re not looking.
