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Published 9:54 AM, November 10, 2021
Below, EPI Research Director Josh Bivens (Josh Bivens) gave an opinion on the October Consumer Price Index (CPI) released today, which has risen by 6.2% compared to a year ago. As Bivens explained, the surge in inflation we saw in 2021 was not driven by macroeconomic overheating. Rather, this surge is mainly driven by COVID-related factors: spending shifts from face-to-face services to goods and supply chain bottlenecks. Read the full Twitter topic.
Core inflation rose slightly, up 4.6% year-on-year, but it is still a large number. However, in my opinion, the main determinant of this rise still does not include macroeconomic overheating. 2
— Josh Bivens (@joshbivens_DC) November 10, 2021
The first point-rising demand for goods-weakened in the third quarter, and demand for goods shrank. But the supply chain dysfunction has actually gotten worse. In the face of huge demand, the actual output of domestic cars has declined in some way. 4
— Josh Bivens (@joshbivens_DC) November 10, 2021
The ARP exemption for individuals increased personal income by more than 4% in 2021 (to the third quarter). Even if it was the only reason for the 2% acceleration in core inflation during that period (obviously not), it still means that households are ahead. 6
— Josh Bivens (@joshbivens_DC) November 10, 2021
Even if ARP contains “too many” mitigations in early/mid 2021 (it does not), it does not mean that macro policies should become tighter in the future. Too much or too little, most of the fiscal stimulus from ARP is behind us. 8
— Josh Bivens (@joshbivens_DC) November 10, 2021
All in all, the surge in inflation we saw in 2021 was not driven by macro overheating. This surge is mainly driven by Covid-related factors: the redistribution of spending from face-to-face services and port closures and other supply chain chaos. 10
— Josh Bivens (@joshbivens_DC) November 10, 2021
In a perfect world, I had hoped for 100% output/employment growth. But we do not live in a perfect world. Given the limitations of the real world, financial relief is the right move in early 2021, and passing BBBA is the right move today. 12
— Josh Bivens (@joshbivens_DC) November 10, 2021
Moreover, it is too early to call for further hard braking on macroeconomic policies. Fiscal policy (again, even with the BBB) becomes less expansionary in 2022, and the Fed has announced that it has begun to scale down. Today’s inflation figures certainly don’t stop there. 13/13
— Josh Bivens (@joshbivens_DC) November 10, 2021
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