Economics Expert Says October’s Inflation Win Is “Too Early,” Tries To Eliminate “Political Pull.”

One economics professor is offering the “Eeyore” interpretation on October’s consumer price index, despite the fact that markets may be excited to see a Federal Reserve turnaround following a cooler-than-expected inflation data (CPI).

According Brian Brenberg, “there’s a political bias to declare victory relatively early so that this subject may get put to bed as a political drag.” “However, the truth is that we still have a very, very, very long way to go in terms of the economy. And if we arrive too soon, we run the risk of making the issue persist for a very long time.”

The Labor Department reported on Thursday that the CPI, a comprehensive index of prices for goods and services such as gasoline, food, and rent, increased by 0.4% from September to October. On an annual basis, prices increased 7.7%.

Both of those numbers fell short of the 0.5% monthly increase and headline figure of 8% predicted by Refinitiv economists, which might be encouraging news for the Federal Reserve as it attempts to rein in runaway inflation through a series of brisk interest rate increases. Since January, it represented the smallest annual inflation rate.

POLITICAL GRIDLOCK IS THE ECONOMY’S “BEST CASE SCENARIO,” MARKET EXPERTS DISCUSS.

However, markets gave hints Thursday that investors are anticipating a Fed rate rise turnaround as a result of a sign of slowing inflation. The S&P 500 increased by 3.3%, the NASDAQ Composite increased by more than 4.5%, and the Dow Jones Industrial Average increased by more than 700 points.
You can tell by the market’s reaction that all these people want to hear is the Fed say, “You know what, we’re done tightening the screws,” according to Brenberg. “I believe there is a lot of cheering going on in this market right now. However, I don’t believe it accurately reflects the risk that Main Street still faces if inflation continues well into the following year and beyond.”

The economist argued that the “true” cause of inflation is a shortage of supply in the market and predicted that the Fed would stick to its plan to hike rates by 50 basis points in December.

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“You must increase productivity again. Supply networks must be restored, which calls for increased investment and entrepreneurship in the sector “Brenberg elucidated. “You may reduce demand to lower inflation by a few percentage points, but to get inflation back to 2%, a truly healthy economy, you must boost this economy’s supply side. That is the real, underlying problem with this economy.”

As a result of pressure from an administration “that has proven at the outset that it didn’t want to address the inflation problem,” Brenberg also expressed doubts about the Fed’s capacity to carry out its mandate.
As the Fed comes under intense political pressure to change course, Brenberg explained, “what ends up happening is that instead of really fixing this problem, you start to back off and we end up stuck in this range of 5% inflation rather than the peak inflation that we’ve seen of, let’s say, 8 to 9%.”

Brenberg added that Main Street would be “killed” by a prolonged inflation phase and warned that the government spending plans Biden has set up over the last two years will take effect in 2023.

The professor went on to say that Republican political inaction would only have a “limited role” in reducing economic stimulus spending.

Because of the choices that have been made over the last two years that already exert inflationary pressure, Brenberg indicated that a lot of expenditure will take place regardless of what happens. “Biden has essentially done harm that cannot be undone in the current climate. Nobody will be able to undo the damage that will manifest itself now, next year, and the year after that. Republicans can contribute to limiting harm by limiting the amount of additional spending.” Brenberg encouraged the bank’s chairman to keep his “eye back on the ball” as the Fed continues its tightening route.

“You are not expected to pay attention to politicians. Being well-liked isn’t what you do. Your task is to reduce inflation to a level where it no longer negatively impacts families and workers as it currently does “said he. “Politics cannot be played. You must work as hard as you can on economics.”

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