The Fed raising interest rates in an effort to stop inflation from getting worse, but Indiana’s Sen. Mike Braun (R) is questioning if raising interest rates will be enough to stifle the problem.
The chairman of the Federal Reserve, Jerome Powell, said last week that employers having issues filling job openings and wages rising at the quickest rates in many years are some of the issues behind rising inflation.
Rising wages can have side effects, one of which is a concept called “cost-push inflation.” Put simply, cost-push inflation occurs when the cost of producing materials and goods goes up. An example of cost-of-production is paying workers; the higher wages go, the prices of the goods made by those workers go up.
Many other factors can play into cost-push inflation, but Braun feels that has had more play in the inflation issues than people realize
“I’m wondering if the Fed can do much. I’m a believer that the cost-push side of inflation is what’s really kept a lid on it,” Braun said on Fox Business. “Powell accommodated that the balance sheet is bigger than it’s ever been. I don’t know how we get this back in Pandora’s Box. Last time it took high-interest rates and a long time.”
Braun added on to his criticism of what he said is the White House’s role in creating higher inflation.
“I got here, were $18 trillion in debt three years ago,” he said. “We are $30 trillion now, and Biden puts a budget out there that puts us $45 trillion in ten years.”
Back in March, President Biden laid out a budget proposal worth $5.8 trillion for 2023 with the priorities of the plan including efforts to curb climate change, rebuild the country’s infrastructure, and stay competitive with China.
1 comment
This is the first time in recent history that the Fed has raised rates under a Democrat. Given the economy killing nature of those hikes, the Fed usually waits until there is a Republican in office so the fallout cannot get blamed on the left.
Their stated goal of a few % hike will not stem the inflation caused by massive amounts of dollar creation (Hey Braun, this is what’s causing your cost-push), it’s going to take close to a 20% rate for an extended duration to halt the decay.
And nothing will ever reverse the damage, the higher prices we have are here… forever. Enjoy your pay cut!