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By Lyle Muller July 1, 2021

Rising inflation fears are real but complex

If Your Time is short

  • U.S. Rep. Cindy Axne, D-Iowa, said in a June television news interview that the nation is not remotely close to saying inflation is rising.
  • She spoke the same day a federal report said inflation in the 12 months ending in May 2021 was at 5%.
  • Axne’s congressional office said she is waiting for expert economists to declare rising inflation before she will, and the economists are waiting for more data over time to see whether or not May’s rate was a blip or sign of things to come.

U.S. Rep. Cindy Axne, D-Iowa, caught the interest of her political opponents, plus anyone else concerned, about a June 10 report that showed the inflation rate for the 12 months ending in May at 5%. That is the highest 12-month rate since 5.5% in the 12 months ending in August 2008.

"Well, we’re not even remotely close to a point to say that we’re at rising inflation so no, I wouldn’t agree with that," Axne said when asked during a WHO-TV interview in Des Moines if she thought Republicans were correct when warning that federal spending on the last stimulus distribution in March was fueling inflation. 

"I mean let’s wait ‘til we have actual, an expert, who says that that’s what’s happening. Right now, we’ve been able to, you know, keep inflation from being a big issue," she continued, in the 8-minute, 15-second interview.

Axne said in the interview she did not favor a fourth round of stimulus checks.

Ian Mariani, Axne’s spokesman, said Axne is not ready to call the 5% figure shown in the report for May a trend because economic experts have not been ready to do that. 

"She’s listening to experts who say it’s not a trend," Mariani told PolitiFact Iowa.

Moreover, it is too soon to analyze whether or not a trend exists because the nation is in the middle of the time period needed to do that analysis, Mariani said. He said Axne is relying on economic analysts to determine how much time is needed to call higher inflation a trend.

What economists say

Analysts already had inflation on their mind as spring wound down. The reported inflation rate in April – 4.2% over the previous 12 months – showed signs of an increase. 

Consumer prices rose by 3.9% in May but the Democrat-controlled White House and independent Federal Reserve said prices would settle down.  

"Inflation has increased notably in recent months," Federal Reserve Board Chairman Jerome H. Powell said at a June 16 news conference. 

Driving the increases were price hikes related to COVID-19 pandemic disruptions to the supply chain for many goods and pass-through energy costs, he said. Notably, motor vehicle prices have increased.

But, analysts need more information before knowing where inflation is headed, Powell said, stressing patience while analysts see more data in the coming months. 

"As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal, and the median inflation projection falls from 3.4% this year to 2.1% next year and 2.2% in 2023," he said.

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The Fed’s Open Market Committee had projected these increases in March. Economists consider inflation around 2% to be healthy.

In a June 16 statement, the Open Market Committee wrote: "The path of the economy will depend significantly on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain."

Ira Kalish, the chief global economist for the financial auditing firm Deloitte Touche Tohmatsu Ltd., wrote on June 29 that consumer spending was high in March and gave credit to extra cash they had because of the government stimulus checks they received, increased vaccinations and businesses reopening after being shuttered during the pandemic. 

Spending in May was up from February and at pre-pandemic levels, he wrote.

James Knightley, chief international economist at ING, told Bloomberg News he expected inflation to remain higher than usual for longer than the Federal Reserve predicts. 

"Supply capacity of the U.S. economy may not be able to keep pace with demand growth, which is already evident in supply shortages from semiconductors through to labor," he said for the Vince Golle-Kyungjin Yoo Bloomberg story. 

But, 49 economists surveyed May 7-13 by the National Association of Business Economics (NABE) said they think the May inflation rate will be short-lived. NABE surveys are done quarterly.

"NABE panelists have grown more optimistic about the prospects for economic growth in 2021," NABE President Manuel Balmaseda, chief economist at CEMEX, wrote in the NABE Outlook for May.

Holly Wade, executive director of the Nashville-based small business advocacy NFIB Research Center, said 56% of those responding to the May survey expect economic growth this year, while 15% expect an economic downturn. 

"Inflation expectations moved up significantly from those in the March survey, but panelists anticipate inflation easing in the second half of 2021, with no resurgence in 2022," Wade wrote.

Eric Wingorad, senior economist for Alliance Bernstein, told CNBC News that factors that do a better job of determining inflation trends have been subdued. 

Harvard professor and former adviser for President Barack Obama Jason Furman told the Associated Press determining what will happen with inflation this year is complicated. But, he suggested inflation could be higher than the recent norm.

"I don’t think anyone thinks the recent rate of price increase is going to continue," Furman said in the AP interview. "The question is, how much does it show? Does it slow down all the way back to the 2% increase every year we used to see? Or, does it slow down less than that, and we’re left with something more like a 3% increase every year?"

Our ruling

Axne is wrong when she says people aren’t remotely close to saying inflation exists, or that it isn’t an issue. The numbers show short-term inflation, and plenty of economists are weighing in on what that means. But, that doesn’t mean at this point long-term inflation, many of the nation’s top economists are saying. In fact, those economists say, they expect the May number to be a blip in a year when inflation will get back to the near normal or slightly elevated 3% range. 

We rate the claim Half True.

Our Sources

U.S. Bureau of Labor Statistics report, "Consumer Price Index Summary," June 10, 2021

Transcript, Fed Chair Jerome Powell press conference, June 16, 2021

Federal Reserve Board press release, June 16, 2021

Federal Reserve Board, Federal Open Market Committee, "March 17, 2021: FOMC Projections materials, accessible version"

U.S. Bureau of Labor Statistics, "Consumer price index up 4.2 percent from April 2020 to April 2021," May 19, 2021

Washington Post, "Prices rise 3.9 percent annually in May, as policymakers maintain inflation is temporary," by Rachel Siegel, June 25, 2021

Phone interview, Cindy Axne spokesman Ian Mariani, June 23, 2021

PolitiFact, "How big is the threat of inflation in the post-pandemic era?" By Louis Jacobson and Tim Kertscher, May 13, 2021

Deloitte Highlights, "Weekly Global Climate Update," by Ira Kalish, June 29, 2021

Associated Press, "Inflation ahead? Even a top economist says it’s complicated," by Christopher Rugaber, June 21, 2021

Bloomberg News, "U.S. Inflation Expectations Mount in Latest Survey of Economists," by Vince Golle and Kyungjin Yoo, May 14, 2021

CNBC News, "Consumer prices jump 5% in May, fastest pace since the summer of 2008," by Jeff Cox

National Association of Business Econonics press release, "NABE Outlook for May." 

Axios, "Economists see higher growth and inflation for 2021," by Dion Rabouin, May 24, 2021

The Balance, "What is the Current US Inflation Rate?" by Kimberly Amadeo, June 10, 2021

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