Inflation Soars in March. Even Higher Inflation Is Coming.

Blame Biden for the high inflation today. Blame Biden and Putin for the double-digit inflation that is coming.

The Bureau of Labor Statistics just released the monthly change in the Consumer Price Index (CPI) for March. The CPI increased by a whopping 1.2%. That raises the inflation rate for the last 12 months to 8.5%. While many will blame the Russian invasion for the price spike, the reality is that most of the inflation was caused by government policy.

As I have noted in my columns at least a dozen times since last year, government policy has caused this inflation and government policy can end it. Since the federal government is unlikely to change most of its policies, inflation will worsen in the coming months.

It is true that the Russian invasion of Ukraine is contributing to the inflation problem. But most of the impact of that invasion has yet to be felt. Energy prices rose significantly last month, which added to the high overall inflation rate. Energy prices stabilized in April, yet the inflation rate for April may be as high as March’s number.

PPI, Wages, Demand Up

That’s because there are inflation pressures building. Producer prices are rising rapidly. That will push up consumer prices. Labor costs are rising.

But the most significant factor affecting the inflation rate is the excess demand in the economy, which is entirely a result of federal government policy.

For the last two fiscal years, the federal government has spent nearly $6 trillion more than was raised in tax revenue. This created pure excess demand, especially considering that the economy is now producing at a rate that is about 2% higher than pre-pandemic levels. In total, that means disruptions in the supply chain is not the primary cause of this inflation.

While it is true that there are supply chain disruptions in some markets, like the market for imported goods or the market for products using computer chips, overall supply issues are not the problem.

Adding to the excess demand is the shockingly irresponsible monetary policy of the Federal Reserve. In spite of rising inflation, which started very early last year, the Fed continues its…