Inflation may reach double digits by summer. A recession could follow by year-end.
The Bureau of Labor Statistics just released the Consumer Price Index (CPI) for February. Prices rose by 0.8% for the month which means the annual inflation is 7.9%. That’s the highest number since 1982.
Biden, Fed Blind
Unfortunately, the worst is yet to come as the Biden Administration and the Federal Reserve refuse to act.
The latest inflation numbers do not reflect the increase in energy prices due to the Russian invasion of Ukraine. The run-up in prices from the Russian activity occurred mostly in March. That means next month’s inflation number will worsen.
Since Russia and the Ukraine supply, large amounts of food and fertilizer, the reduction in supply from the war will push food prices higher. While consumers could cut back somewhat on energy consumption by driving less and perhaps lower thermostats in their homes, consumers cannot eat less.
Contrary to President Biden’s explanations, there is much he can do to offset rising energy prices. In fact, it is Biden’s energy policies that caused the price increase prior to the Russian invasion. Simply reversing his policies would bring down energy prices quickly.
Had Biden not revoked the permit to build the Keystone XL pipeline in January of 2021, there would be more than 800,000 barrels of oil flowing to refineries. That is more than the 580,000 barrels per day that we were buying from Russia.
It would also signal to the oil industry that there is a future, which would encourage more investment to increases the supply further. Biden also canceled all drilling on federal lands and stopped the drilling in ANWR, off the coast of Alaska. Reversing those bans would lead to drilling quickly restarting.
The high inflation is not caused by supply chain disruptions nor by businesses' price gouging as the President has suggested. Since the economy today is producing about 2% more output than before the pandemic, supply issues are not leading to higher prices.
Admittedly in the market for imported goods or in markets that rely on computer chips, some…