Powell’s Inflation Worsens

Powell’s numerous Monetary Policy mistakes have led to the fifth year of high inflation.

The latest data released by the Bureau of Labor Statistics shows that in January the annual inflation rate rose to 3%. Recall the Federal Reserve’s target, set when inflation was more than 9% in June 2022, was 2%. We never reached that target, yet Fed Chair Jerome Powell cut interest rates three times in the Fall of last year.

Most economists view these rate cuts as a mistake. This follows a series of mistakes that Powell’s Fed has made. Although poor monetary policy decisions are not the sole cause of the extraordinarily high inflation, the Fed could have acted differently in the last year and a half to bring inflation down.

The high inflation that the U.S. has experienced since January 2021 is due to three things. One is the Biden administration’s policy to reduce the supply of energy by restricting the production of oil and natural gas. Since energy prices directly account for 7% of the Consumer Price Index, and indirectly almost 30%, the resulting high energy prices added significantly to inflation.

Second is the massive increases in federal government spending. In 2019, the government spent about $4.5 trillion. By 2024 the number was more than $6.5 trillion. This added huge amounts of excess demand, especially since at least 30%…