By Alexandra Harris and Erik Wasson | Bloomberg
The Federal Reserve’s interest-rate hikes to bring inflation under control are starting to work, while President Joe Biden is doing everything possible to support the US central bank, two administration economic advisers said.
“What we can see in the economic data is the Fed is focused on bringing down inflation,” Cecilia Rouse, chair of Biden’s council of economic advisers, said on CNN’s “State of the Union” on Sunday. “And we are starting to see signs that the actions they are taking is having an effect.”
Inflation is spreading deeper into the US economy, slamming the door on hopes that Fed will dial back rate increases that threaten to tip the US — and perhaps the world — into recession. The Fed has boosted its benchmark target by 3 percentage points this year to a range of 3% to 3.25%.
Core inflation, excluding food and energy, jumped to a 40-year high of 6.6% in September from a year ago, outpacing forecasts and triggering a slide in US bond markets, as investors bet that the Fed will go for two more 75 basis-point increases this year.
That spells trouble for a US economy that’s already been slowing down, as soaring prices eat into paychecks while higher borrowing costs crush the housing market. Last week’s inflation report showed broad price pressures with big jumps in the cost of food, shelter and medical services.
“We are doing all we can to ease inflationary pressures,” White House economic adviser Jared Bernstein said. “It is going to take some time.”
Biden’s options include further deploying the Strategic Petroleum Reserve, Bernstein said on “Fox News Sunday.”
“The fact is there is capacity to use the SPR to deal with some of the energy shocks we’re seeing in the world,” he said. “But I’m not saying we will. That’s up to the president to decide, he hasn’t made that decision yet.”
“There is a lot of tailwind in this economy, a lot of strength,” Bernstein said. “We actually believe probability for soft landing is good.”
Biden said on Thursday that the price of US gasoline is “still too high and we need to keep working to bring it down.” He pledged he’d “have more to say about that” this week.
Independent Senator Bernie Sanders said the Fed is “hurting the situation” and suggested that the wealthy should pay more in taxes instead.
Inflation “is a global issue,” he said on NBC’s “Meet the Press.” “But at a time when working families are struggling when the people on top are doing phenomenally well, I don’t think you go after working people.”
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