Transportation Secretary Pete Buttigieg‘s claim about inflation came under scrutiny from Gordon Johnson of GLJ Research, who argued in an X post on Wednesday that pricing pressures have actually been trending upward.
What Happened: Commenting on a news story that contended claims by Republican Vice President candidate Sen. J.D. Vance (R-Ohio) that the Inflation Reduction Action of 2022 stoking pricing pressure, Buttigieg, who serves in the [Joe] Biden administration, said, “Sure is interesting how we passed the Inflation Reduction Act, and then inflation went down.”
The Inflation Reduction Act was passed by Congress and signed into law by Biden on Aug. 16, 2022. Apart from provisions for supporting clean energy and reducing emissions, the bill also includes measures to bring down healthcare costs and increase revenue to the government through tax reform. The latter is expected to help the government gather the necessary resources to fund the remaining provisions of the bill.
Johnson At Odds: Johnson stepped in to make a counterclaim. Sharing a chart showing inflation’s trajectory, the analyst challenged Buttigieg to prove his point with the chart. Inflation has not gone down, only the pace of price increases has slowed, he said.
“They are still rising and you don’t seem to care…at all,” Johnson said. The chart showed that the annual consumer price inflation is 11.4% points above the 2% inflation trend seen since March 2020.
Delving into the root cause, the economist said the problem was excessive government spending and regulations. “That undermines productivity and results in larger budget deficits, which depletes savings and results in the Fed creating more money to buy Treasuries,” he said. The economist called upon massive spending cuts by the government if inflation were to go down.
See Also: Best Inflation Stocks
Why It’s Important: The slowdown in inflation from the 9%+ level in the summer of 2022 to 2.5% in August has allowed the Federal Reserve to reduce the Fed fund rate, which was hovering at a 22-year higher ahead of the 50 basis-point cut announced last week. Inflation deniers argue that the owners-equivalent rent component, which is one of the main reasons for the sticky inflation, is based on lagging data and is not reflective of the current situation.
Schiff, meanwhile, sees renewed inflation pressure as the U.S. dollar weakens amid the rate cuts, potentially pushing up inflationary pressure.
More clarity on inflation will likely emerge when the Bureau of Labor Statistics releases the personal income and spending report for August on Friday. The report comprises the personal consumption expenditure index, which is the Fed’s favorite inflation gauge.
The iShares TIPS Bond ETF TIP, an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Wednesday's session down 0.38% at $110.41, according to Benzinga Pro data.
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