“I will do everything to minimize the ‘Putin rise’ at home. » By announcing the boycott of Russian oil on Tuesday March 8, Joe Biden had found an easy culprit for the rise in inflation, Vladimir Putin and the invasion of Ukraine. In reality, not everything is attributable to the Russian president, and the inflation figure in February in the United States reached a record 7.9%. Unheard of since January 1982, when the America of Ronald Reagan and the president of the American central bank, the Fed, Paul Volcker fought against stagflation.
From month to month, the trend is accelerating: prices increased by 0.8% in February, compared to January, after an increase of 0.6 points in the two previous months, according to figures published on Thursday March 10, by the Department of Labor. The increase is now widespread, prices excluding food and energy jumped 6.4% over one year, while housing is up 4.7% and explains 40% of the monthly increase in the index excluding food and energy: this durable figure attests to inflation that is firmly rooted in the economy.
A pre-existing energy crisis
This is due to the bottlenecks hampering the recovery of the economy from the Covid-19 pandemic, the excessive demand for goods at the expense of services, Joe Biden’s excessive and mistimed fiscal stimulus plan in March 2021, and the ultra-accommodating policy of the Fed, which kept its key rates at almost zero, favoring the recovery of employment.
Added to this now is the war in Ukraine, which is accentuating a pre-existing energy crisis, due to the lack of necessary productive investments in recent years. Energy prices rose by a quarter over one year and by 6.6% in February. But this figure will get worse with the increase in prices at the pump in recent days following the war: on March 10, the average price of gasoline had increased by 28.5% since January 31, according to figures from the American Automobile Association. Gasoline weighing 3.7% of the index, if we add the 20% rise not taken into account, we can estimate that an additional inflation of 0.75 point is in the pipe just on the gasoline if prices stay high.
The only positive news is that there is no inflation-wage spiral. The latter increased by 5.1% over one year, but this increase came to an abrupt halt in February. Catastrophic consequence for American employees: their real wages are falling, after having rebounded under Donald Trump.
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