Nothing can fix inflation now, ‘economic stupidity’ is underway by the Fed, Biden - Steve Hanke
The Consumer Price Index (CPI) was released by the Bureau of Labor Statistics on Wednesday, with April’s reading reported at 8.3%. This was slightly lower than March’s 8.5%, but still higher than the consensus estimates of 8.1%.
Steve Hanke, professor of Applied Economics at Johns Hopkins University told David Lin, anchor for Kitco News, that this modest month-over-month decline should not be interpreted as a normalization of consumer prices.
On the contrary, inflation is here to stay, he said.
“I anticipate, as I have anticipated for some time, that we will have what they call ‘elevated inflation’, between 6% and 9% through 2023, maybe going into early 2024. The reason for that is that no matter what the Fed does, actually, now, there’s such a huge monetary overhang waiting to come out the monetary inflation overflow valve in the ‘monetary bathtub’, that it’ll just keep feeding the inflation,” Hanke said.
Hanke, who was previously on President Ronald Reagan’s Council of Economic Advisors, has said that inflation is caused by an increase in the money supply, not logistical or supply chain issues as a result of the Ukraine war or COVID.
Importantly, even if energy and food prices spike, the rest of the CPI doesn’t necessarily have to follow, Hanke noted.
“If the money supply is well-behaved, everything else doesn’t have to go up, and it won’t go up, by the way,” he said. “The only thing that oil and food prices do is that they kind of unhinge and un-anchor inflation expectations.”
Hanke’s comments come as President Joe Biden announced on Tuesday that inflation is now his “top domestic priority.”
For more information on how the Fed and Congress can fight inflation, watch the video above.
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