Joe Biden got one thing right about soaring inflation: it’s not just a U.S. phenomenon.
On Friday, European economic data showed prices rose in June at an annual rate of 8.6%, a record, and a level identical to that seen last month in the U.S. The news comes as the European Central Bank, which has lagged the Federal Reserve in tightening monetary policy, is poised to raise interest rates.
The number was up from May’s 8.1% and is likely to add to the continent’s woes as Europe faces increasing disruption to its energy supplies stemming from Russia’s February invasion of Ukraine.
Although the overall rate was 8.6%, France and Spain both saw inflation hit the 10% level.
The ECB meets in late July to announce a rate increase and has also said it would likely raise rates again in September. The Fed, meanwhile, will meet in the middle of this month and is expected to raise rates by 50 or 75 basis points following its 75 basis point hike in June.
ECB President Christine Lagarde promised to fight inflation at a conference in Portugal earlier this week.
“If the inflation outlook does not improve, we will have sufficient information to move faster,” Lagarde said.
Fed Chairman Jerome Powell has also sounded a hawkish tone, vowing “unconditional” commitment to reining in rampant inflation.
Powell and Biden often cite the global nature of inflation in response to criticism from Republicans and others that both were late to tackle the problem, spending much of 2021 treating it as “transitory.”
Economists generally accept that disruptions to global supply chains, along with federal stimulus programs dating to 2020, contributed to the soaring price levels. But there is also widespread belief that the Fed waited too long to reverse course from a monetary policy that was highly accommodative and spurred booms in the stock markets and the real estate sector.
Since the Fed announced its plans to raise rates earlier this year, both the bond and stock markets have sold off sharply – with stocks having their worst first half of a year in decades–and housing has cooled significantly.
On Thursday, an inflation measure that Powell and others at the Fed watch closely, showed a slight moderation in the rate of price growth, with the core personal consumption expenditures index coming in at a 4.7% annual growth rate for June, down from 4.9% a month earlier.
“This morning’s report was much more tame than the CPI was,” Luke Tilley, chief economist at Wilmington Trust, said Thursday referring to the consumer price index. “CPI overstates inflation relative to the PCE.”
But that is likely to provide little comfort to critics of Biden, who spoke Thursday during a press conference at the NATO summit in Madrid.
“The bottom line is, ultimately the reason why gas prices are up is because of Russia. Russia, Russia, Russia,” the president said. “The reason why the food crisis exists is because of Russia.”
That brought a sharp retort from Republicans, including Rep. Elise Stefanik of New York.
“Is your family traveling for Fourth of July weekend? The average price for a gallon of gas in New York is $4.93 thanks to Joe Biden,” the congresswoman tweeted./agencies
