Inflation hits new historic high, painting a bleak economic picture

Inflation numbers released Tuesday by the U.S. Labor Department show prices are up in nearly every consumer category, but especially energy costs. President Biden traveled to the midwest to explain how his administration is going to ease the pain at the pump. David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, joins Judy Woodruff to explain.

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  • Judy Woodruff:

    We have two major stories tonight.

    The Russians are concentrating more of their forces in the south and the east in Ukraine. We will have more on that in a moment.

    But, first, here at home, inflation numbers released today by the U.S. Labor Department show prices up in nearly every consumer category, but especially energy costs. President Biden traveled to the Midwest to explain how his administration is going to try to help ease the pain at the pump for Americans.

    Soaring inflation fueled by record high gas prices brought President Biden to the heartland today. Speaking in Menlo, Iowa he told Americans he gets the economic pain they're feeling.

  • President Joe Biden:

    I'm doing everything within my power by executive orders to bring down the price and address the Putin price hike.

  • Judy WoodruffF:

    The president left Washington this morning hours after the Labor Department released its monthly price report, painting a bleak picture.

    In March, inflation was up 8.5 percent from a year ago, the sharpest increase since 1981. It's felt across the economy, at the grocery store, where the cost of meat, poultry, fish and eggs is up 14 percent and dairy products up 7 percent, clothing prices also up 7 percent, and at the gas station, a stunning 48 percent increase in the past year.

  • President Joe Biden:

    On June 1, you're not going to show up at your local gas station and see a bag over the pump that has the cheapest gas.

  • Judy Woodruff:

    The president focused today on energy announcing that his administration would allow the sale of gas made with 15-percent ethanol from June to September. The cheaper blend of gasoline known as E15 is usually banned in the summer, when driving rates peak, to prevent air pollution.

  • President Joe Biden:

    Even if it's an extra buck or two in the pockets when they fill up, it will make a difference in people's lives.

  • Judy Woodruff:

    Today, the president argued rising costs, made worse by Russia's invasion of Ukraine, call for emergency action.

  • President Joe Biden:

    We need to address this challenge with an urgency that it demands.

  • Judy Woodruff:

    The administration predicts that the use of E15 this summer could save drivers 10 cents per gallon of gas.

    It remains to be seen how much this move, combined with the release of millions of barrels from the Strategic Petroleum Reserve, will blunt inflation's costly rise.

    To help explain what is behind the numbers, I'm joined by David Wessel. He's the director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

    David Wessel, welcome back to the "NewsHour."

    So, you have been digging into this report, into these numbers. Tell us what you're seeing here, beyond — we know the headline is inflation. Prices are way up. What are you seeing?

  • David Wessel, Brookings Institution:


    So, definitely, prices are way up. And, definitely, energy prices are one, but not the only driver of this. And while there's no denying that inflation is uncomfortably high, there was a glimmer of hope in these numbers, hope that the torrid pace of inflation is cooling off.

    For one thing, energy prices are a bit down from their peak. So this could be the worst reading for this episode. Secondly, the price of goods fell. Goods prices have been up a lot, in part because people who were not going to the movie theater or traveling were buying a lot of stuff. But that's now starting to ease.

    It's a sign that kinks in the supply chain may be easing. And, finally, economists like to look at the underlying pace of inflation, that is, excluding food and energy, as important as those are in household budgets. And that measure rose less in March than in any of the previous five months, a sign that maybe the worst is behind us.

  • Judy Woodruff:

    Everyone would welcome that.

    And by goods, just to clarify, David Wessel, you mean anything that's manufactured, from refrigerators to clothing, anything people are buying.

  • David Wessel:


    So, like used car prices, which are up a lot over the last year, more than 35 percent above year-ago levels, actually fell nearly 4 percent in March, a sign that maybe that's beginning to shift.

  • Judy Woodruff:

    But, overall, we do see prices going up?

    What are the main things that are driving it? I mean, we know it is the supply chain. You just referred to that. What else can we point a finger at?

  • David Wessel:

    So, basically, the reason we have so much inflation is, there's a lot of demand in the economy, and the supply side has not been able to adjust for that.

    One reason we have so much demand is that we had a very big fiscal stimulus in the president's American Rescue Plan, and that has contributed to the demand in the economy. People got a lot of money, they saved it, and they have been spending it.

    On the supply side, we have a couple of things going on. There's the kinks in the supply chain, the shortages of semiconductors that are affecting the ability of car producers to produce new cars. Obviously, the Russian invasion of Ukraine has raised — has driven up energy prices.

    And, also, the supply of workers has been somewhat constrained. There are a couple of million people who were in the labor force before the pandemic and they haven't come back yet. So the reason we have inflation is, there's a lot of demand, not enough supply, and that's causing prices to go up.

  • Judy Woodruff:

    So, given all this, how much can President — President Biden or any of our policymakers, the Federal Reserve, how much difference can they make in taking the edge off of this?

  • David Wessel:

    So I think taking the edge off is a very good phrase.

    I'm sure that people who drive a lot are going to appreciate the fact that President Biden has done something that, if the White House is right, will save 10 cents off the price of gasoline. But the president actually can't do very much. He's doing a lot of things because he knows it's politically important to look like he's doing something.

    But I don't think any of the things they have done will add up to very much. Interestingly, one thing they could do, but they're reluctant to do, is to repeal the Trump tariffs that are raising the price of imports to the United States.

    So this is largely going to fall, as it always does, on the Federal Reserve. And the Federal Reserve is going to raise interest rates a lot this year, in the hopes of making it harder for people and businesses to borrow and for them to demand less in goods and fewer services, in the hopes that will help equilibrate the economy and bring down the inflation rate.

  • Judy Woodruff:

    And I know people are bracing for those higher interest rates.

    But, Dave Wessel, when President Biden points to Vladimir Putin and says so much of this is his fault, how much of that is accurate?

  • David Wessel:

    Well, there is something to that.

    But, basically, we had an inflation problem before Russia invaded Ukraine. It — we had too much demand and the economy. We had all these supply problems related to COVID or other things that had nothing to do with Putin's invasion of the Ukraine.

    But, on top of that, now we have the surge in oil prices, the surge in gasoline prices, the surge in food prices that are clearly that trigger. So, it got started before Putin, but Putin is making it much worse. Gasoline prices were up 18 percent in March alone, and that's almost entirely because of the Russian invasion of Ukraine.

  • Judy Woodruff:

    Well, it is — these are sobering numbers. And it's really, really helpful to have this kind of explanation.

    David Wessel, we thank you.


  • David Wessel:

    You're welcome.

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