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The inflation blame game

Amid rate hikes, the US is engaged in a toxic politics of inflation

Published Thu, Jun 23, 2022 · 12:11 AM

Julian Jacobs

AMID declining real wages, accumulating household debt and the looming prospect of recession, the problem of inflation is now firmly in the arena of US partisan politics. It is yet another issue defined by clear political divisions between Democrats and Republicans. And like many other partisan conflicts, a politically motivated understanding of inflation threatens Washington’s ability to develop a coherent response.

On June 15, the Federal Reserve came down hard on inflation. Along with a rate hike of 0.75 percentage points, the highest since 1994, the Fed also indicated that rates could rise above 3 per cent by the end of the year. Amid rapidly growing household pessimism about the future of price stability and the prospect of recession, the Fed is taking significant measures to steady the ship. On the same day as the rate hike, the US reported a 0.3 per cent decline in retail sales in May and a 14.4 per cent collapse in housing starts.

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