Hybrid Hearing - The Inflation Equation: Corporate Profiteering, Supply Chain... (EventID=114484)
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On Tuesday, March 8, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a hybrid hearing entitled, “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and COVID-19."
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Witnesses for this one-panel hearing will be:
• Demond Drummer, Managing Director Equitable Economy, PolicyLink
• Tyler Goodspeed, Kleinheinz Fellow, Hoover Institution
• Rakeen Mabud, Chief Economist and Managing Director of Policy, Groundwork Collaborative
• Sandeep Vaheesan, Legal Director, Open Markets Institute
• Mark Zandi, Chief Economist, Moody’s Analytics
The COVID-19 Pandemic and Recent Inflation Trends
The Federal Reserve (Fed) has a mandate to pursue maximum employment and stable prices. Since 2012, the Fed has targeted a long run average of two percent inflation. Policymakers at the Fed believe this target is consistent with fulfillment of its mandate, and view a low but stable level of inflation as helpful in preventing deflation.2 As economic recovery from the recession caused by the COVID-19 pandemic continued throughout 2021, large price increases were seen in several segments of the economy.
The Consumer Price Index (CPI), a metric of the cost of goods and services developed by the Department of Labor, increased by 7.5% in 2021, the highest level since 1982.3 Officials at the Fed and central banks around the world have observed this trend, largely attributing higher prices to supply chain bottlenecks, shortages, and disruptions from the pandemic.4 The Fed does not primarily use CPI to gauge inflation; instead it tends to focus on a measure of inflation called the personal consumption expenditures (PCE) index, which covers a broad and more dynamic range of goods. Core PCE, which excludes food and energy given their volatility, increased by 5.2% in 2021 and more than 3% above the Federal Reserve’s long-term target, and it rose to its highest rate since 1983. In general, economists expected some inflation to occur as businesses re-opened and the economic recovery began to take off. However, inflation has been more pronounced and has manifested itself differently than many experts predicted. For example, as the leisure and hospitality sectors re-opened and people began traveling again, it was expected that there would be a surge in items like airline ticket prices, but that these price increases would be temporary and limited to certain sectors.8 Instead, waves of new coronavirus variants kept demand restrained in some of those sectors, but caused a sustained and unexpectedly high surge in demand across a wide range of consumer goods, leading to large price spikes for many goods, especially used cars and trucks. The semiconductor shortage that contributed to higher
auto prices throughout 2021 was prolonged and exacerbated when the Delta variant stalled production in numerous Asian countries.
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Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=409148