The Wall Street Journal: White House More Than Doubles Its Inflation Forecast in New Update

Article published: 27 Aug,  2021

IB Economics syllabus: Macroeconomics (inflation, monetary policy)

Inflation is reaching its highest levels in over 10 years in the United States. As a result, the government (White House) has increased its consumer price index (CPI) forecast to 4.8% for this year. This is much higher than the Biden administrations previous forecast of 2% (May 2021). However, the Central Bank of the U.S. (known as the Fed) is not concerned too much about this as its chairman, Jerome Powell stated that this higher inflation is mostly caused by a “relatively narrow group of goods and services that have been directly affected by the pandemic and the reopening of the economy.” A good key concept for this commantary could be economic well-being or equity, just have a look at the below video.

In your evaluation, don’t forget to talk about the possible policies, such as the reversal of the Fed’s “easy-money policies later this year amid strong economic growth” and the pros and cons of demand-pull inflation, especially how its redistributive effects.

Source of image: ANNA MONEYMAKER/GETTY IMAGES

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