There is no question that the COVID-19 pandemic has produced some important negative consequences that continue to affect the global economy. One of the most significant consequences was undoubtedly the surging inflation, which is closely related to other economic and geopolitical problems, such as Russia’s unjust war in Ukraine. While the Federal Reserve has responded promptly to both the economic effects of the healthcare crisis and inflation, this issue continues to plague the US and numerous other countries around the world.
According to a Pew Research Center study conducted in April and May 2022, 70% of Americans considered inflation to be the most critical issue facing the country at the time. While 5 in 10 Americans said they were preoccupied with issues like healthcare affordability and violent crime, 7 in 10 thought inflation was a huge concern for the US. However, economists and policymakers struggled to come up with different strategies to solve this critical issue, while President Joe Biden said he was optimistic about the direction of the US economy.
“I’m telling the American people that we’re going to get control of inflation,” he added, expressing hope that the Federal Reserve will succeed in achieving a “soft landing” by reducing economic growth without entering a recession.
The Federal Reserve Took Action
The Federal Reserve is responsible for five key tasks to promote the health of the American economy and the stability of the US financial system. Setting monetary policy to encourage employment and promoting stable prices across America are probably its most important tasks. Recently, the Fed approved a fourth consecutive three-quarter point interest rate increase, hinting changes in its monetary policy approach to fight inflation. According to CNBC, this essential move represents a step forward in consolidating the most aggressive pace of monetary policy tightening since the early 1980s.
According to the central banking system, changes in the monetary policy are to be expected soon. The Fed will consider “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments” when determining future hikes. According to The New York Times, the Fed has recently started to intensify its actions against inflation, with officials now struggling to bring balance to the US economy. However, fighting the fastest-evolving inflation in 40 years may be easier said than done, and new measures may be needed in order to achieve economic balance.
The Fed is likely to pursue a more aggressive monetary policy stance, that could lead to interest rates rising more and more in the near future.
Consumer Prices Continue to Rise in the US
The Consumer Price Index (CPI) increased more than expected in September, according to the BBC, suggesting that the fight against inflation may be far from over. However, recent data showing a slowdown in wage growth seems to give US economists and Fed officials some hope. According to CNN, this is a promising sign for the Fed, as it continues to fight surging inflation. However, as prices continue to rise and inflation spreads from the goods to the services sector, more and more Americans might be living beyond their means, especially during the holiday season.
According to President Joe Biden, Americans are still overwhelmed by the high cost of living. The President promised to do his best to support middle class families to cope with surging costs. The fact that important progress has already been made in taming inflation was a key point in the President’s speech, but he also noted that current prices are still too high for numerous families. Fighting against global inflation remains a top priority for his administration, he said. He also informed Americans that the Inflation Reduction Act will help millions of people benefit from more affordable healthcare costs and better drug prices, while lowering their energy costs.
Fighting global inflation is one of the most significant issues facing America this year, according to President Joe Biden. “Because of my economic plan, the United States is in a stronger position than any major economy to take on this challenge,” he noted.
