Predicting Inflation Trends if Biden Secures Another Victory



The Federal Reserve has chosen to keep its rates steady due to persistent inflation and strong economic data. Inflation, which was previously on a downward trajectory, is now at 3.5%. Economists predict that inflation will continue to moderate in the event of President Biden’s re-election, but it will rely heavily on factors such as the pandemic’s impact, monetary policy, and the housing market.

Inflation Impacting American Consumers

Stubborn inflation is affecting Americans on every front: from grocery to housing prices, high costs are significantly impacting consumers.

Federal Reserve’s Response to Inflation

With this backdrop, the Federal Reserve’s decision to maintain its rates following the FOMC meeting on May 1 was predictable. It left room for future rate cuts, moving to a “wait and see” approach due to continued inflation and strong economic data.

The Current State of Inflation

After previously indicating three rate cuts this year, the Fed now suggests cuts may occur later than expected. Inflation, previously on a downward trend, has once more accelerated, reaching 3.5% according to April’s CPI data.

Inflation and Biden’s Re-Election Campaign

Inflation is a key concern for voters, and presidential candidates, including President Biden, are addressing this in their campaigns. President Biden has launched several initiatives to combat inflation, such as the 2022 Inflation Reduction Act. However, some experts argue that other factors, not just policy, play a role in controlling inflation.

Economist Opinions on Inflation Under Biden’s Potential Second Term

According to Mark Zandi, chief economist of Moody’s Analytics, inflation is expected to moderate and align with the Federal Reserve’s target early in Biden’s potential second term. However, William Luther, director of the American Institute for Economic Research’s Sound Money Project, believes inflation will return to the Fed’s 2% target regardless of the November election results.

Effects of Biden’s Spending Plan on Inflation

Luther points out that Biden’s commitment to running large budget deficits to finance various welfare programs has led to an increase in the federal deficit. This, in turn, puts upward pressure on interest rates. To control inflation, the Fed may have to target higher interest rates, resulting in Americans bearing the costs of these higher rates.

This article first appeared on Economist Predictions for Inflation If Biden Wins Again

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