“It’s very concerning. We keep getting inflation readings, new data that comes in as recently as this past week, and we keep getting surprised. It’s higher than we expect,” Fed branch President Neel Kashkari said on CBS News’ “Face The Nation.” “And it’s not just a few categories. It’s spreading out more broadly across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back down.”
He said that wages are increasing for many Americans. However, so are the cost of goods and services, adding that workers will suffer a “real wage cut” due to price pressures.
Earlier this month, the Bureau of Labor Statistics released its Consumer Price Index data, showing a key metric for inflation rose 9.1 percent year-over-year in June, or the highest figure seen since the early 1980s. Another metric, the Producer Price Index, shot up by 11.3 percent in June, which is also the highest in decades.
Wages are “not going up as fast as inflation, so most Americans’ real wages, real incomes are going down,” Kashkari told the outlet Sunday. “I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral–that is not yet happening,” he added.
“High prices and wages are now trying to catch up to those high prices … and so we need to get the economy back into balance before this really does become from a very wage-driven inflation story,” the Fed president added.
Some Republicans and economists have said that multi-trillion-dollar federal government spending packages around COVID-19 have triggered high inflation, while some have blamed it on COVID-19-related shutdowns of supply chains that haven’t fully rebounded.
Without making mention of government spending, Kashkari blamed the price surge on the war in Ukraine and COVID-19. He didn’t elaborate.