The Federal Reserve Bank of Minneapolis president warned Sunday that the current rate of inflation is troubling and will spread across the country.
"It’s very concerning. We keep getting inflation readings, new data that comes in as recently as this past week, and we keep getting surprised. It’s higher than we expect," Fed branch President Neel Kashkari said on CBS News’ "Face The Nation." "And it’s not just a few categories. It’s spreading out more broadly across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back down."
He said that wages are increasing for many Americans. However, so are the cost of goods and services, adding that workers will suffer a "real wage cut" due to price pressures.
Earlier this month, the Bureau of Labor Statistics released its Consumer Price Index data, showing a key metric for inflation rose 9.1 percent year-over-year in June, or the highest figure seen since the early 1980s. Another metric, the Producer Price Index, shot up by 11.3 percent in June, which is also the highest in decades.
Wages are "not going up as fast as inflation, so most Americans’ real wages, real incomes are going down," Kashkari told the outlet Sunday. "I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral–that is not yet happening," he added.
CauseSome Republicans and economists have said that multi-trillion-dollar federal government spending packages around COVID-19 have triggered high inflation, while some have blamed it on COVID-19-related shutdowns of supply chains that haven't fully rebounded.
Without making mention of government spending, Kashkari blamed the price surge on the war in Ukraine and COVID-19. He didn't elaborate.
"Just at its basic level, inflation is when demand is outstripping supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID. We hoped that supply would come online more quickly. That hasn't happened," Kashkari said. "So, we have to get demand down in the balance. Now, I hope we get some help on the supply side, but that doesn't change the fact that the Federal Reserve has its job to do, and we are committed to doing it."
A new bill proposed by Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.) that claims to reduce inflation won't do much, he argued. Instead, the Federal Reserve's monetary policies are what will drive it down, he said.
Last week, Fed officials again raised interest rates by 75 basis points. It's the second time in a month that the central bank has done so in recent weeks.
“The current picture is plain to see. The labor market is extremely tight, and inflation is much too high,” Federal Reserve Chair Jerome Powell said during a news conference following Federal Open Market Committee's decision on July 27.