‘Inflation will ease as Covid declines’: White House

President Joe Biden’s top economic adviser Cecilia Rouse has cited several factors in the coming months that she says should help slow a steep rise in consumer prices.

Cecilia Rouse, chair of the US Council Of Economic Advisers. She says the recent acceleration in inflation reflected a mismatch between supply and demand during the pandemic. Picture: Bloomberg

President Joe Biden’s top economic adviser has sought to ease concerns about elevated inflation, saying that several factors in the coming months should help slow a steep rise in consumer prices over the last year.

“We expect inflation to moderate over the coming year, because we believe that the factors that have been causing high inflation will begin to ease as Covid cases gradually decrease,” Cecilia Rouse, chair of the White House Council of Economic Advisers, said during a US Senate banking committee hearing.

Inflation in January was the highest in nearly 40 years, as the consumer-price index – a measure of what consumers pay for goods and services – rose 7.5 per cent from a year earlier.

Republicans on the committee pressed Ms Rouse and other White House economists about how the rise in prices is affecting everyday Americans’ buying power, while arguing that the Biden administration’s spending proposal for education, climate and social programs would further fuel inflation.

“It’s just really important that we not engage in yet another spending spree, which will only make it worse,” Senator Pat Toomey, the committee’s ranking member, said of inflation.

Ms Rouse said the acceleration in inflation reflected a mismatch between supply and demand during the pandemic.

Global economies, including the US, have been dealing with supply-chain bottlenecks because of Covid-19 disruptions. Meanwhile, American consumers during the pandemic boosted purchases of goods, while pulling back on services, further straining supply chains.

US employers have also reported difficulties attracting workers, as Americans have dealt with limitations on their ability to work, including illness and childcare constraints. “We expect that as people come back into the workforce as the pandemic is under control, that will ease some constraints. Getting people back to work will help on the supply side,” Ms Rouse said. “And as the pandemic is addressed around the world, that will help bring more goods as well.”

Ms Rouse also called on the committee to advance the nominations of President Biden’s five picks for the Federal Reserve. Senate Republicans earlier this week refused to attend a committee vote on the nominees because of their concerns with Sarah Bloom Raskin, Mr Biden’s nominee for a top post at the Fed.

The confirmation process for all five, including Fed chair Jerome Powell, has stalled as a result.

“In the short term, [inflation] really is in the purview of the Federal Reserve, which is why confirming the nominees is so very important,” she said. Other committee Democrats during the hearing echoed that sentiment, while Republicans rejected it.

“To suggest that the way that we’re going to fix the inflation problem is to get these board members confirmed, really either they don’t understand that we have a functioning board that can take action today, or they don’t want to acknowledge that fact because of an agenda,” said Senator Thom Tillis, a Republican.

The pending nominations aren’t expected to affect the Fed’s monetary policy decisions. Two of the nominees are currently on the board. Mr Powell’s four-year term as chairman expired earlier this month

The Wall Street Journal