The latest consumer price index released by the U.S. Department of Labor on the 12th is the inflation report for December 2021. Compared with the same period in 2020 the previous year, the average domestic inflation in the United States came to 7%. (Getty Images)

(We Chinese in America Media Editor Tang Zhao, January 13, 2022)"Prices have been rising, how does Biden put out the fire?" The U.S. Department of Labor released the latest National Consumer Price Index (CPI) on the 12th, showing that the overall inflation rate in the United States has reached 7% in December 2021. The speed at which everything is rising has reached a "40-year high" since June 1982 - although the Biden administration and the Fed have previously believed that the current inflation problem is only a "short-term response to the post-pandemic", as long as the global supply chain continues to stabilize, and in line with the pace of resumption of work and employment and economic recovery in the United States, the United States will be able to control this wave of "epidemic inflation" by slowly raising interest rates starting in mid-2022. However, the latest CPI report shows that prices continue to rise, which seems to be more durable than Biden's imagination. Therefore, market opinion also judges that the Fed will move ahead and raise interest rates in March ahead of schedule.

But while U.S. inflation hit a 40-year high, what happened in June 1982, when the last record happened? Why is soaring U.S. inflation more difficult to suppress than Washington thinks? Why did Biden fail to act, and what are his political and economic concerns? The latest consumer price index released by the U.S. Department of Labor on the 12th is the inflation report for December 2021. Compared with the same period in 2020 the previous year, the average domestic inflation in the United States came to 7%. Among them, the "Core Price Index", which integrates food prices, fuel prices... The number is a little slower, but it is the largest increase since 1991.

The report shows that in addition to the core price index, the two major price items that reflected the U.S. inflation trend in December last year were “rent” and “used car prices.” In terms of rent, the average rent in the United States has risen in the past year. The price of used cars has soared due to the "lack of cars" and "increase in new car prices" caused by the global chip shortage and supply chain disruption. It rose another 3.5% in November.

The Wall Street Journal said that the CPI report in December 2021 confirmed that the high inflation trend in the United States is more difficult than imagined. Although in terms of core price indices such as energy and food prices, the "inflation speed" in December was slightly slower than that in November, and the soaring angle of inflation also slowed down. But the inflation rate of 7% is still a "40-year high" since 7.1% in June 1982.

However, the current inflation situation in the United States is very different from that in 1982. At present, the current inflation situation in the United States is triggered by the epidemic, and it is still in the "rising stage" until now. But in the state of 1982, the U.S. economy was heading towards the "high inflation end point".

The "Financial Times" emphasized that a reasonable and moderate inflation rate is a positive indicator for the US economy, which means that demand is growing, and the market has investment incentives. Although the current CPI figure in the United States is a 40-year high since 1981, the rate of inflation has slowed down from November to December. Compared with the double-digit inflation from 1979 to 1981, thus. economy is far from a crisis at all.

But the problem is that the current wave of price inflation has begun to make the public feel pain -Especially for the middle- and lower-class income earners, their disposable daily expenses are more likely to be overwhelmed by the rising housing prices, rent and food, and daily necessities prices. At a time when the domestic epidemic in the United States is entering its "final peak", this may cause an unimaginable social crisis.

Generally speaking, the way to fight inflation is for the Fed to "raise interest rates" to cool the market. After years of quantitative easing and ultra-low interest rate policies, the Federal Reserve has repeatedly warned as early as last year that the United States will begin to "normalize monetary policy" in 2022 and gradually raise interest rates during the year.

However, as the epidemic disrupted the global market supply chain, the local epidemic situation in the United States from last winter to the present has been fluctuating due to the emergence of Omicron. For this reason, in the past few months, the US federal government has hoped to use this wave of "post-epidemic inflation" to accelerate the recovery of the market economy, and on the other hand, it also hopes to use this to promote the original "post-epidemic resignation wave". The number of American workers will also be forced to return to the job market more actively because of inflation and price pressures, so as to effectively distribute the labor force and alleviate the current "big job shortage" dilemma.

Therefore, despite the nervousness that the inflation figures have been rising for consecutive months, the executives of the administration headed by Biden still believe that this is only a "short-term effect", and there is no need to tighten the monetary policy that would have raised interest rates earlier. ecause ause according to the existing trends and figures, the domestic inflation figures in the United States still show no signs of "effective relief", and the labor ebb tide and labor shortage problems have reversed because of the outbreak of Omicron in the United States. The problem of the global supply chain is also stuck on the verge of the limit of the epidemic in China and its "zero countermeasures", and the end cannot be seen for a while. Instead, it may encounter more severe short-term supply chain disruptions after the Lunar New Year and the Beijing Winter Olympics. Therefore, after the December CPI figures came out, the Federal Reserve, which had repeatedly released rumors to "raise interest rates earlier", also strengthened the market's suggestion of raising interest rates earlier in March.

"The problem of the supply chain should be resolved soon within this year... I am more worried about the return to work of the local labor force, which may be more serious and difficult than the supply chain shock." In a statement to the House of Representatives on the 11th, Fed Chairman Jerome Powell said.

The "Wall Street Journal" pointed out that due to the long holiday at the end of the year and the outbreak of the Omicron epidemic in the United States in December, the employment situation, and the morale of the resumption of work in the market are not obvious, and there is even a delay and wait-and-see situation, especially in hotels, tourism, and catering. Service providers are currently forced to sharply increase their service prices due to severe labor shortages and rising prices of everything. If the situation persists beyond the spring, it may bring another wave of operating pressure to collective closures of small and medium-sized U.S. companies.

Considering that the United States is about to usher in the "midterm elections" in November this year, electoral movements in various places and the next generation of political views in the Congress and opposition will begin to compete fiercely after the spring. If Biden is unable to effectively revive inflation, employment and people's livelihood and economic issues, "the people can feel" the post-epidemic recovery results, for the ruling Democratic Party, it will inevitably bring about a domino effect of doubts about Biden's re-election.

(Source: Compiled from Online Information)