Consumers have endured the pain in everyday routines. Unleaded gasoline is up 61per cent in the past year. Men’s suits, jackets and coats, 25 per cent, Airline tickets, 34 per cent. Eggs 33 per cent. Breakfast sausage, 14 per cent.
Under Chair Jerome Powell, the Federal Reserve never anticipated inflation this severe or persistent. Yet after having been merely an afterthought for decades, high inflation reasserted itself with ferocious speed as shortages of labor and supplies ran up against a propulsive rise in demand for goods and services across the economy.
In February 2021, the consumer price index was running just 1.7 per cent above its level a year earlier. From there, it accelerated — past 2 per cent in March, past 4 per cent in April and 5 per cent in May. By December, consumer prices hit the 7 per cent year-over-year barrier. And on and on it went: 7.5 per cent in January, 7.9 per cent in February. And the increases have topped 8 per cent every month since March.
The United States has endured worse inflation before, but not in many decades. The post-World War II inflation peak reached nearly 20 per cent in 1947, a result of the lifting of wartime price curbs, supply shortages and pent-up consumer demand. The inflation of the 1970s and early 1980s peaked at 14.8 per cent in March 1980 before the Fed exorcized high prices with aggressive rate hikes that caused brutal back-to-back recessions in 1980 and 1981-1982.
For months, Powell and some others characterized high inflation as merely a “transitory” phenomenon while the economy rebounded from the pandemic recession faster than anyone had anticipated. No longer. Now, most economists expect inflation to remain painfully elevated well after this year, with demand outstripping supplies in numerous areas of the economy.