Column: American economists and consumers got inflation wrong during its recent surge. They still do
LA TimesSen. JD Vance tried to blame the $4 price of a dozen eggs on Kamala Harris in this campaign video. The “strong policy response” Powell referred to was the Fed’s raising of short-term interest rates 11 times, a total of 5.25 percentage points, from March 2022 through July 2023. In November 2021, however, Powell told Congress that it was “probably a good time to retire that word.” The Fed’s monetary policy response was launched March 18, 2022, with a quarter-point hike in interest rates. “Publicly reported supply chain bottlenecks and cost shocks,” wrote Isabella M. Weber and Evan Wasner of the University of Massachusetts Amherst, “serve to create legitimacy for price hikes and create acceptance on the part of consumers to pay higher prices.” The Fed’s turbocharged response to inflation — notwithstanding the perception of some economists that its interest rate increases were too late and too small — is understandable. As Treasury Secretary Janet L. Yellen warned in 2021, “inflation can be a self-fulfilling prophecy.” That’s especially true when an economically illiterate news media stokes consumer fears.