Economic experts are predicting trouble for President Biden as the nation heads toward a November general election, leaving little time for his administration to fix the stubbornly high inflation plaguing Americans.
Inflation currently stands at 3.3% year over year, according to Labor Department statistics. Although it’s down from a near-record high of 9.1% in June 2022, it’s still higher than at any point in the decade before Biden took office.
The Federal Reserve announced on Wednesday that it would keep the federal funds rate range at 5.25% to 5.5%, where rates have been held steady since last July, an expected decision considering that inflation rose less than was forecast for the 12 months ending in May and the core consumer price index rose better than expected by 3.4%.
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From left: former President Trump, Federal Reserve Chairman Jerome Powell and President Biden. (Getty Images/File)
Fed Chairman Jerome Powell said the report builds confidence that inflation is moving toward the 2% target, but he also said more evidence is needed before the central bank starts easing policy.
Economist Peter Morici said the report was “certainly good news” for Biden, but noted that “prices are still rising and it’s just a report.” He also pointed out that the factors that influenced the report were not pocket issues for most Americans.
“[The report] was mainly affected by the drop in energy prices. In the services sector, inflation is still very strong. … Housing and the cost of housing are going up 5% a year,” he said, adding that energy prices are subject to fluctuations and can look very different in a month.
“The underlying sources of inflation that worry the Fed are still present. The Fed won’t be able to cut interest rates much this year, if at all. Even if it does, it will come too late to give much help Joe Biden.”
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Economist Peter Morici. (Fox News/File)
Joseph LaVorgna, an economist who served as former President Trump’s chief economic adviser, told Fox he didn’t think inflation would come down, but he also said, before the report, that the Fed “doesn’t want a reaction.”
“If I were to advise the president, I would want to do things to get inflation as low as possible,” he said. “The administration, I would argue, has pursued policies that have unfortunately worsened the inflation situation.”
“Never in the history of the economy have we had a budget deficit above 5% of GDP with unemployment below 4%. That is a recipe for high inflation, which is what we have,” he said. “I’m concerned that the only way we’re going to get inflation down, at least where the guidelines are in place where people aren’t feeling the pain of higher prices, unfortunately, is a recession.”
Dr. Arthur Laffer, an economist who served in both the Reagan and Trump administrations, said he could not predict how the economy and inflation would affect the overall results of the next election, but he argued that the Biden administration had broken “the kingdoms ” of the economy, namely going in the wrong direction on taxes, government spending, monetary policy, regulation and trade.
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Arthur Laffer. (Jim Watson/AFP via Getty Images/File)
“When I look at the five kingdoms, taxes, it’s moved in the wrong direction. Government spending? It’s moved in the wrong direction. Sound money? It’s moved in the wrong direction. Regulation has moved in the wrong direction, especially in energy , but also in other things, he moved in the wrong direction,” Laffer said.
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“I can’t imagine an administration more at odds with what needs to be done and the consequences are very, very clear,” he added. “The employment population is not quite back to where it was before the pandemic. Price levels are very high. Interest rates — I could just go on and on. That’s how I would look at it objectively, as an economist. [Biden] he simply does not know economics and neither does his administration”.
When it comes to elections, however, Laffer said you “have to get off your Ouija board.”
FOX Business’ Nora Colomer contributed to this report.
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