President Joe Biden on Wednesday night again rejected concerns that inflation could be more severe and longer lasting than previously thought — even as a chorus of voices on Wall Street have begun to accept that recent price spikes could stick around.
Danielle Lippi, a student and a registered Republican, asked Biden about the latest inflation data at CNN’s town hall in Ohio on Wednesday evening.
“Are you concerned about the higher inflation prices, especially as we see gasoline, automotive, and food prices increase rapidly?” she asked.
“What is your administration doing to help prevent the economy from overheating, such as the poor and middle class are not hurt by the higher prices of goods in the long run?”
Biden reiterated what the White House and Federal Reserve officials have been saying for months: that prices are expected to rise as the economy thaws from the pandemic, but inflation won’t last long as supply chain kinks and shortages are worked out.
“The vast majority of the experts, including Wall Street, are suggesting that it’s highly unlikely that it’s going to be long-term inflation that’s going to get out of hand,” Biden said. “There will be near-term inflation, because everything is now trying to be picked back up.”
The president added that it’s good news that “the economy is picking up significantly.” He noted that any comparisons of prices today to prices one year ago are going to be warped because at this time last year the pandemic had gutted the economy, driving prices to record-low levels.
“It’s rational, when you think about it, the cost of an automobile is kind of back to what it was before the pandemic,” he said.
While some goods, like the president said, did see massive drops in prices during the pandemic and are just now returning to pre-pandemic levels, that’s not the case for cars, which have driven some of the largest inflation jumps in recent months.
The cost of a new car or truck is up about 5.3 percent from a year ago, according to the most recent data available from the Bureau of Labor Statistics. Compared with 2019’s pre-pandemic levels, the cost of a new car or truck is still up about 5 percent, the data shows.
Used cars are even worse, for buyers. From a year ago, prices are up about 45.2 percent. Compared with 2019 levels, prices are still up a whopping 41.2 percent, according to the federal data.
Pressed by CNN host Don Lemon on whether the White House’s proposed massive federal spending could exacerbate inflation further, Biden pointed to a Moody’s report released Wednesday.
“Worries that the plan will ignite undesirably high inflation and an overheating economy are overdone,” Mark Zandi, the chief economist at Moody’s Analytics, wrote in the report. “This concern cannot be dismissed, but it is likely misplaced.”
Biden’s dismissal of inflation echoes comments made by Federal Reserve Chairman Jerome Powell, who acknowledged last week in front of Congress that inflation will likely stick around at high levels for a few months, but will eventually come down.
Despite Powell’s view, some of the biggest players on Wall Street have raised the alarm that inflation could be worse than the feds are prepared for.
“I worry about inflation. I do not believe inflation is going to be transitory,” BlackRock CEO Larry Fink told CNBC last week. Instead, he said, “It’s going to be more systematic over time.”
“How the Federal Reserve and how other central banks navigate that is going to be very important,” he added.
Jamie Dimon, CEO of JPMorgan Chase, questioned the Fed’s take on inflation, too.
“Inflation could be worse than people think. I think it’ll be a little bit worse than what the Fed thinks. I don’t think it’s only temporary,” he said on the bank’s post-earnings conference call with investors last week.
Goldman Sachs CEO David Solomon added that there’s “no question” inflation has ticked up.
And Steven Mnuchin, who served as Treasury secretary under former President Donald Trump, on Wednesday didn’t mince words.
“I respectfully disagree with him on his not being concerned,” Mnuchin told CNBC, speaking about Powell and inflation. “It’s important for the Fed to get ahead of the curve so that we don’t end up with 4 percent or 5 percent interest rates … the Fed has to normalize.”