I don't suppose it will do much good to point this out yet again, but here's the standard, headline inflation rate over the past six years:
In the years before the pandemic, inflation averaged 2.1%. Over the past year, inflation has averaged 3.3%.
For the Fed, this is a big deal. It means they feel like they have to keep interest rates high in order to wring out that last 1%. But for the average consumer, it's meaningless. For the entire past year, inflation has been barely a percentage point higher than normal. This is hardly noticeable.
And as long as we're at it, it's worth noting that purchasing power has gone up over the past year as average wages have outpaced inflation:
Also, unemployment has been under 4% for 2½ years, its best performance in the past half century. For the record.
Be all that as it may, I don't think you get your cheap money again yet.
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The thing is that the current rates by themselves are having an inflationary impact by people not moving from their homes to preserve their 2.75% mortgage rate. This in turn increases home prices and rents. Another thing to consider, the Fed, my micromanaging to an exact rate has the impact of a command economy. Inflation rates need to breathe and anything between 1-3% (pretty much where are now) is something one would expect. Finally, a majority of the sectors have an inflation rate that is within the acceptable paradigms, the Fed, by trying to squeeze those sectors (e.g., shelter) that have a higher inflation rate, is misallocating capital pressures on healthier sectors of the economy to those sector’s own detriment.
Interest rates aren't high. Like inflation, they have been nearly normal for the past year. It still seems like the next Fed move will be to lower rates, but the economy keeps telling them they don't need to rush.
Interest rates (on Government liabilities) aren't high by historical standards, but nobody is taking into account that historical rates were paid on risky liabilities (the risk being that the Treasury would run out of gold and leave bond buyers holding "worthless" assets), and rates today are being paid on risk-free Government financial assets, for the purpose of giving money to people merely because they already have money.
By “nearly normal” he means >50% higher than normal.
50% of 2.2 is a small number.
To be exact, it's 1.1%.
Very small, meaningless changes in an already small number can appear large in percentage terms. Its important to think clearly about the topic and not simply view it as a math exercise.
Price changes of 1.1% are.... nearly meaningless.
Dishonest much?
"Inflation is at near historic normal levels, and unemployment has been low for over two years. Here's why that's a challenge for Biden..."
The application of the Taylor Rule suggests the rates are around 1.25 higher than should be. From a historical view, rates are not that high but I would not call them low either, and that are higher than should be. And the current rates are are having a crimping effect on some sectors. It is pretty obvious they need to come down and real economic impact of the current rates is just enriching the rich further while continuing an economic imbalance.
This is definitely true. Inflation is fine and hasnt been a problem for a long time now.
The Fed appears slow and out of touch with their duties and stated goals. Or perhaps they aren't clearly stating what their objectives truly are.
"But for the average consumer, it's meaningless."
Kevin, you and Krugman still have this blindspot, re: price increases v. inflation, you're both too smart to not understand the difference, so I'm left assuming you're both being a bit misleading, though not technically dishonest.
All your chart says is that the price of milk, gas, eggs, meat, etc., increased less this year than the previous year, yet cumulatively, they went up 11-12% over the last couple years. No one is calculating the rate of inflation when looking at their grocery bills, or their receipt for lunch, they just see that it costs significantly more.
This is Biden's problem, though not his fault, and I hope he and his team find an effective way to address it when the campaign is in full swing.
"No one is calculating the rate of inflation when looking at their grocery bills, or their receipt for lunch, they just see that it costs significantly more."
And no one is taking into account that their wages rose more than enough to cover the difference.
You seriously think people are so stupid as to not know whether their pay increased enough to cover those higher prices?
Seriously? Kind of the definition of the condescending liberal.