Thursday, August 11, 2022
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Biden blames inflation on supply chain issues and Putin

On Monday (March 14), U.S. President Joe Biden blamed soaring inflation on supply chain issues and Russian President Vladimir Putin’s decision to invade Ukraine.

“The very products that we needed for the things they wanted to buy were slowed down by disruptions in the supply chain. So what happened? Prices went up significantly,” Biden said, speaking at the National League of Cities conference in Washington,.

“(Russian President Vladimir) Putin began amassing troops across the border (from Ukraine) and then crossed. And guess what? The world took notice. The market anticipated. Prices went up and then Putin invaded. Make no mistake: the current spike in gas prices is largely the fault of Vladimir Putin. It has nothing to do with the American rescue plan,” he added.

Biden’s speech comes as U.S. households are coping with the fastest pace of price increases in 40 years and policymakers are watching closely to see if the shock leads to higher inflation expectations, which could fuel further price hikes, or if consumers largely view the surge in prices as temporary.

The Russian invasion of Ukraine, which has led to higher fuel prices and may lead to increased food costs, adds more uncertainty to the outlook.

A measure of market-based U.S. inflation expectations by the London-based ICE Benchmark Administration (IBA) showed that near-term forecasts jumped sharply in response to government data that showed inflation running about 7%, and rose again after the Russian attack. Long-term inflation expectations inched higher following the Russian invasion.

Fed officials are expected to take a key step in the fight against inflation when they meet this week on Tuesday and Wednesday by raising interest rates from near-zero levels, roughly two years after they slashed rates in response to the coronavirus pandemic.

The U.S. economy is on more stable footing now, with the unemployment rate at 3.8% and wages rising. But many households are also struggling with rising costs.

(Production: Arlene Eiras)

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