A&M economics expert: Don’t expect inflation rates to go down soon

According to an economist, had the Fed acted sooner things might be different
Published: Apr. 18, 2022 at 10:21 PM CDT
Email This Link
Share on Pinterest
Share on LinkedIn

BRYAN, Texas (KBTX) - Inflation in the U.S. rose 8.5% in March, the highest increase since 1981 according to the Labor Department’s Consumer Price Index. Dennis Jansen, Director of the Private Enterprise Research Center and the Jeff Montgomery Professor of Economics at Texas A&M University, joined First News at Four to discuss what people can expect from inflation in the near future.

Don’t expect things to get better too soon. According to Jansen, “even if we’re at the peak, [inflation] is not going to go away quickly.”

He believes the inflation rate will be significantly above the Federal Reserve Board’s 2% target for as long as the rest of the year.

As for the government’s role, the Federal Reserve System is in charge of price stability and market stability. They are slowly raising the interest rate on reserves, but they’re doing so at what Jansen calls a “rather glacial pace.” The fed raised the interest rates on reserves a quarter of a percent in March, and they’re talking about raising it a half a percent at the next meeting in early May.

Jansen believes the Fed should have “started raising interest rates and reducing its asset purchasing program” last summer when the inflation rate was starting to rise, however they thought the inflation experience would be temporary and would go away on its own.

Now the Fed is aiming for a “soft landing,” where they can gradually bring down the inflation rate yet not have the unemployment rate rise. Jansen isn’t sure they are going to achieve their hopes of a soft landing though. Some commentators have called what the Fed’s looking for an “Immaculate disinflation.”

“I think the actions they take will likely cause some rise in the unemployment rate and the question is how much,” explained Jansen.

Copyright 2022 KBTX. All rights reserved.