White House Says Coming Months’ Inflation Bump to Be Transitory
(Bloomberg) -- The White House said inflation is likely to settle back down after a temporary acceleration in the next few months, as the Biden administration seeks to address Republican criticism that its stimulus plans will overheat the economy.
Annual inflation is likely to rise in the coming months because of comparisons with year-earlier figures, supply-chain disruptions and pent-up demand for services, according to a blog post Monday by Jared Bernstein, a member of the Council of Economic Advisers, and Ernie Tedeschi, a senior CEA economist.
Price gains will “fade back to a lower pace thereafter as actual inflation begins to run more in line with longer-run expectations,” they wrote.
The blog post aims to give a more detailed explanation of why inflation pressures are likely to dissipate after top officials including Treasury Secretary Janet Yellen repeatedly said there’s no reason for any significant concern about prices. The White House outlook is in line with the views of Federal Reserve officials and the median of private forecasts collected by Bloomberg News.
“Such a transitory rise in inflation would be consistent with some prior episodes in American history coming out of a pandemic or when the labor market has quickly shifted, such as demobilization from wars,” Bernstein and Tedeschi wrote. “We will, however, carefully monitor both actual price changes and inflation expectations for any signs of unexpected price pressures that might arise as America leaves the pandemic behind and enters the next economic expansion.”
Some Republicans have attacked President Joe Biden’s $1.9 trillion coronavirus-relief bill passed last month and the proposed $2.25 trillion infrastructure and jobs plan as likely to boost inflation to undesirable levels, amid extra borrowing. Larry Summers, a former Treasury Secretary and top Obama administration economic adviser, has also said that Biden risked triggering high inflation by pumping too much money into the economy just as it’s poised to pick up steam.
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