Inflation pauses in August, but it will accelerate as Covid cases decline

Once the current virus spike subsides, inflation will flare up even after the supply chain issues are resolved.

The Bureau of Labor Statistics just released the Consumer Price Index (CPI) for August. The number was .3%, which is the smallest monthly increase since January. That means consumer prices have increased by 5.3% since last August. That’s a slight decline from July’s rate.

Both the Biden administration and the Federal Reserve (Fed) will note that the monthly CPI number has decreased from the .9% recorded in June and .5% in July. This shows that the inflation problem seen in the first half of this year is transitory or temporary, meaning no Fed action is needed at this time.

Are they correct?

Unfortunately, they are probably wrong. Inflation may have taken a pause in the last month or two, but the forces that created inflation are set to take off once the virus ends. Frankly, I am surprised that the August number was .3%. I expected a lower number based on noting many prices, like airfares, have actually fallen in the last month or so.

Both Biden and the Fed continue to believe that the inflation problem we are experiencing in 2021 is temporary and will go away on its own, once the economy fully re-opens. While…