It’s not just that the core inflation rate remains very high. It’s that the inflation is spreading far and wide through the economy. As predicted by everyone with a brain, the early inflation in energy due to disastrous policies combined with the trillions of dollars spraying out of Washington combined to inflate the underlying cost structure of the entire economy. That isn’t going away any time soon.
For the better part of a year, the inflation narrative among many economists and policymakers was that it was essentially a food and fuel problem. Once supply chains eased and gas prices abated, the thinking went, that would help lower food costs and in turn ease price pressures across the economy.
August’s consumer price index numbers, however, tested that narrative severely, with broadening increases indicating now that inflation could be more persistent and entrenched than previously thought.
Rather than fuel, it was food, shelter and medical services that drove costs higher in August, slapping a costly tax on those least able to afford it and raising important questions about where inflation goes from here.
“The core inflation numbers were hot across the board. The breadth of the strong price increases, from new vehicles to medical care services to rent growth, everything was up strongly,” said Mark Zandi, chief economist at Moody’s Analytics. “That was the most disconcerting aspect of the report.”