On November 5, a worker put bags of sweet potatoes into a container in the Alameda County Community Food Bank warehouse in Oakland, California. .

Washington >> Inflation is starting to look like the unexpected-and unwelcome-tenant who is reluctant to leave.

Over the past few months, many economists have sent a comforting message that consumer price surges will not last long, and this situation has disappeared for a generation in the United States. In the comforting words of Fed Chairman Jerome Powell and White House officials, this will prove to be “temporary” as the economy shifts from virus-related chaos to closer to normal.

However, any American who bought a box of milk, a gallon of gasoline or a used car will tell you that inflation has stabilized. Economists have now sent a more frustrating message: price increases may continue into next year, if not exceeded.

On Wednesday, the government said its consumer price index soared 6.2% from a year earlier, the largest 12-month increase since 1990.

Jason Furman, who served as the top economic adviser to the Obama administration, said: "This is a huge blow to the temporary narrative." "Inflation has not slowed down. It has maintained a hot pace."

The sticker shock is hitting the most easily felt places in the family. For example, at the breakfast table: the price of bacon has risen by 20% in the past year, and the price of eggs has risen by nearly 12%. Gasoline soared by 50%. Buying a washing machine or dryer will cost you 15% more than a year ago. Second-hand car? 26% more.

Although the wages of many workers have risen sharply, they are far from enough to keep up with prices. Last month, the average hourly wage in the United States, after accounting for inflation, actually fell by 1.2% compared to October 2020.

Wells Fargo economists coldly joked that the CPI of the Department of Labor-the consumer price index-should represent the "consumer pain index." Unfortunately, for consumers, especially low-wage families, all this is in line with their higher consumer demand before the holidays.

Price tightening is intensifying the pressure on the Federal Reserve, requiring it to get rid of years of loose monetary policy more quickly. It poses a threat to President Joe Biden, Congressional Democrats and their ambitious spending plans.

What caused the price to soar?

Most of this is the flip side of very good news. Under the fierce attack of COVID-19, the U.S. economy collapsed in the spring of 2020 because of lockdown measures, business closures or shortened working hours, and consumers staying at home for health. Employers cut 22 million jobs. During the April-June quarter last year, economic output plummeted at a record annual rate of 31%.

Everyone is prepared for more suffering. Companies cut investment. The replenishment was delayed. What followed was a cruel recession.

However, driven by large-scale government spending and a series of emergency measures by the Federal Reserve, the economy has not fallen into a long-term downturn, but has unexpectedly experienced an exciting recovery. In the spring, the introduction of the vaccine will make consumers more daring to return to restaurants, bars and shops.

Suddenly, companies have to scramble to meet demand. They cannot hire fast enough to fill job vacancies — close to a record 10.4 million people in August — or buy enough supplies to meet customer orders. As business recovers, ports and freight yards cannot handle traffic. The global supply chain is in chaos.

Rising costs. Companies have found that they can pass on these higher costs to consumers in the form of higher prices, many of whom have managed to save a lot of savings during the pandemic.

Furman, now an economist at the Harvard Kennedy School, said: "A considerable part of the inflation we see is the inevitable result of getting out of the pandemic."

However, Furman said that the wrong policy also played a role. He said that policymakers wanted to avoid economic collapse so much that they "systematically underestimated inflation."

"They poured kerosene on the fire."

Furman said that large amounts of government spending—including President Joe Biden’s $1.9 trillion coronavirus rescue plan and the $1,400 check issued to most households in March—overstimulated the economy.

"The inflation rate in the United States is much higher than in Europe," he pointed out. "Europe is experiencing the same supply shocks and the same supply chain problems as the United States. But they are not taking as many stimulus measures."

In a statement on Wednesday, Biden acknowledged that “inflation has damaged American wallets, and reversing this trend is my top priority.” But he said that his $1 trillion infrastructure package includes on roads. Expenditures on, bridges and ports will help alleviate supply bottlenecks.

How long will it last?

As long as companies strive to meet the huge consumer demand for goods and services, consumer price inflation may continue. The job market recovery — employers added 5.8 million jobs this year — means that Americans can continue to squander everything from lawn furniture to new cars. The supply chain bottlenecks have not been eliminated.

BlackRock Global Fixed Income Chief Investment Officer Rick Rieder said: "The demand side of the U.S. economy will continue to receive attention, and the company will continue to enjoy the opportunity to pass through prices."

Megan Green, chief economist at the Kroll Institute, said that inflation and the overall economy will eventually return to near normal levels.

"I think it will be'temporary'," she said of inflation. "But economists have to be very honest in defining transitionality, and I think this can easily continue for another year."

"We need to talk humbly about how long this will last," Furman said. "I think it has been with us for a while. The inflation rate will drop at a rapid rate this year, but it will still be very, very high compared to the historical standards we are used to."

Will we suffer the return of the "stagflation" style of the 1970s?

The rise in consumer prices triggered the specter of returning to the "stagflation" of the 1970s. At that time, rising prices and high unemployment occurred at the same time, ignoring what traditional economists thought might happen.

However, the situation today looks very different. The unemployment rate is relatively low, and the family’s overall financial status is good. The Conference Committee of Business Research Institutes found that consumer inflation expectations last month were the highest since July 2008. But consumers don’t seem to be so worried: Because of their optimism about their work, the committee’s confidence index has risen in the market anyway.

"At least for the time being, they believe that the advantages outweigh the disadvantages," said Lynn Franco, senior director of economic indicators at the American Chamber of Commerce.

After economic growth slowed from July to September due to highly contagious delta variables, it is thought to rebound in the last quarter of 2021.

"Most economists expect economic growth to accelerate in the fourth quarter," Green said. "Therefore, this does not mean that we are facing a slowdown in growth and rising inflation at the same time. We are just facing higher inflation."

The Fed, which controls inflation, is under pressure to control prices.

"They need to stop telling us that inflation is temporary, start becoming more worried about inflation, and then act in a manner consistent with their fears," Furman said. "We have seen a little bit, but only a little bit."

Powell announced that the Fed will begin to reduce the monthly bond purchase plan that it started last year as an emergency measure to try to boost the economy. In September, Fed officials also predicted that they would raise the Fed's benchmark interest rate from a historically low close to zero by the end of 2022-much earlier than their forecast a few months ago.

But if inflation continues to soar, it may force the Fed to speed up this timetable; investors expect the Fed to raise interest rates at least twice next year.

"Since the 1990s, we have been fighting against non-existent inflation," said Diane Swonk, chief economist at Grant Thornton, an accounting and consulting firm. Fight against inflation."

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