Why It’s Not Quite Time To Panic About Inflation

By Emily Stewart  Nov 10, 2021, 5:05

How to think about rising prices, explained by an economist who thinks about this all the time.

Rising prices are definitely a thing right now, and it’s hard not to let a little bit of worry creep in. The United States isn’t experiencing 1970s-level spiraling inflation, but for people leaving the grocery store or a restaurant, the receipt is often a little bit higher than it used to be.

The consumer price index, which measures what consumers pay for goods and services, rose by 6.2 percent from a year ago in October, according to the Bureau of Labor Statistics, the quickest annual clip it’s risen since 1990. Over the course of the month, prices crept up by 0.9 percent.

The data shows prices are up almost everywhere, including gasoline, energy, shelter, food, and new and used cars and trucks. Among the few price indexes to decline were airline fares and alcoholic beverages.

October’s inflation numbers came in above economists’ expectations, and to politicians, the media, and other observers, they are a bit jarring — especially those who have been arguing that much of the current inflation in the economy is temporary.

There are a lot of open questions in the pandemic economy, including what’s going on with supply chains and labor, and inflation remains an issue no one is quite sure how to solve. Regardless of what the experts say, for regular people, the economic landscape can be a little nerve-wracking, especially when it comes to prices. Inflation makes people feel bad about the economy, even when there is plenty to feel good about, too.

I reached out to Claudia Sahm, a senior fellow at the Jain Family Institute and former Federal Reserve economist, to ask how to parse the latest inflation numbers. Sahm isn’t an inflation hawk and has for some time pushed back against fearmongering on the issue, but she acknowledged that the October situation isn’t good.

Wages aren’t broadly keeping up with inflation across all jobs, though they are in some sectors, such as hospitality. However, Sahm notes, the economic situation — and pandemic situation — is much better for many people this year than it was last. She’s not hitting the panic button on prices, but she worries about the implications for the reconciliation bill in Congress, and emphasizes that the Fed is paying attention to what’s going on.

Our conversation, edited for length and clarity, follows.

https://www.vox.com/the-goods/2021/11/10/22775092/inflation-cpi-october-economy-biden-fed