Secretary of Transportation Pete Buttigieg's claim on inflation came under scrutiny since Gordon Johnson from GLJ Research, who argued in a post on X on Wednesday that price pressures have actually been trending higher.
What happened: Commenting on a news story refuting claims by the Republican vice presidential candidate, Senator JD Vance (R-Ohio) that the 2022 Inflation Reduction Action is fueling price pressure, Buttigieg, who serves on the [Joe] Biden The administration said, “It’s interesting how we passed the Inflation Reduction Act and then inflation went down.”
Congress passed the Inflation Reduction Act, and Biden signed it into law on August 16, 2022. In addition to provisions to support clean energy and reduce emissions, the bill also includes measures to reduce health care costs and increase government revenue through tax reform. The latter is expected to help the government gather the resources needed to fund the remaining provisions of the bill.
Johnson disagrees: Johnson stepped in to make a counterclaim. The analyst shared a chart showing the trajectory of inflation and challenged Buttigieg to prove his point with the chart. Inflation hasn't gone down, only the pace of price increases has slowed, he said.
“They keep going up and you don’t seem to care … at all,” Johnson said. The chart showed annual consumer price inflation is 11.4 percentage points higher than the 2% trend inflation seen since March 2020.
As for the root cause, the economist said the problem is excessive government spending and regulations. “That undermines productivity and leads to larger budget deficits, which drains savings and causes the Federal Reserve to create more money to buy Treasury bonds,” he said. The economist called for massive government spending cuts if inflation falls.
See also: Best Inflation Stocks
Why it is important: Slowing inflation from above 9% in the summer of 2022 to 2.5% in August has allowed the Federal Reserve to lower the federal funds rate, which was hovering around the highest level in 22 years before the 50 basis point cut announced last week. Inflation deniers argue that the homeowner-equivalent rental component, which is a major reason for sticky inflation, is based on lagged data and does not reflect the current situation.
Meanwhile, Schiff sees renewed inflationary pressure as the US dollar weakens amid rate cuts, potentially adding to inflationary pressure.
More clarity on inflation is likely to come when the Bureau of Labor Statistics releases its August personal income and spending report on Friday. The report includes the personal consumption expenditures index, which is the Federal Reserve's favorite inflation gauge.
He iShares TIPS Bond ETF ADVICEan ETF that tracks the investment results of an index composed of U.S. Treasury bonds protected against inflation, closed Wednesday's session down 0.38% at $110.41, according to Data from Benzinga Pro.
Read next:
Image via Shutterstock
Market news and data provided by Benzinga APIs
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.