The U.S. shouldn’t worry excessively about high inflation and the rising costs of products because they will settle within a year, the chief economist at Moody’s Analytics argued in a CNN opinion column.
Inflation has rocked the country recently as everything from gasoline to the average price of a home has increased. The consumer price index, a measure of change in the price the average consumer is paying for goods, has surged 6.2 percent to a 30-year high.
But Mark Zandi argued in his column that the “hair-on-fire discourse over high inflation” is “overdone.”
“This uncomfortably high inflation isn’t here to stay,” he wrote. “The economy remains closely tethered to the pandemic. This summer’s Delta wave of infections hurt growth and sparked inflation, but as infections subside, growth is already picking up and inflation will go back into hibernation.”
Others, particularly conservatives, have countered the view that inflation will simply recede over time and leave little impact.
Justin Haskins, the director of the Stopping Socialism Center at the Heartland Institute, wrote in The Hill on Sunday that the U.S. government’s decision to pump trillions of dollars into the economy and hand out stimulus checks for more than a year “created vast supply chain problems that will take months, if not years, to completely fix.”
“The damage that is occurring now will not be reversed without a strong deflationary period, an unlikely outcome that would invite its own set of economic problems,” Haskins wrote.
Zandi attributes most of the inflation to the delta variant, writing that the pandemic shuttered factories in other countries and disrupted global supply chains. And, he said, companies in the U.S. have had to pay employees more money to work during the period of increased and increasingly severe infections, which forced them to bump up the price for products.
The surge in gasoline prices is the result of oil companies producing less oil despite the world consuming 100 million barrels a day, he added.
He predicted “competitive pressures” will eventually entice the companies to increase output over time.
Some have attributed high inflation to increased spending from Democrats, including the $1.9 trillion American Rescue Plan Act passed in March. Zandi said the legislation “gave a boost to demand,” but that tapered off over time. He also finds no correlation between Biden’s Build Back Better agenda — including both the recently passed $1.75 trillion infrastructure bill and the nearly $2 trillion spending package still being debated in Congress — and inflation.
“There is also no good way to connect the dots between the Build Back Better agenda, which is currently being debated in Congress, and higher inflation,” he wrote. “The legislation provides support for public infrastructure and various social programs, and longer term, it is designed to lift the economy’s growth potential, which will ease inflationary pressure.”