Bad news for consumers – prices rose 0.9 percent in October and to a 30-year high, according to data released today by the Labor Department. CEI Senior Fellow Ryan Young explains ways policymakers can help tamp down on inflation:
“Inflation increased yet again. Inflation is what happens when the supply of money grows faster than the supply of goods and services. The goal is to keep their growth roughly in sync. There are two things policymakers can do to help restore the balance.
“One is for the Federal Reserve to tighten up the money supply. While it has said it will do this starting next year, it will face heavy political pressure to keep it loose. Tighter money makes government debt more expensive to pay back, and already-record deficit spending is becoming worse with the infrastructure and social spending bills. Politicians also push for looser money when elections draw near. A series of high-level vacancies at the Fed will create opportunities to pack the Fed with officials who will do what the administration wants. This is not good news for tamping down inflation from the monetary side.
“The second way to fight inflation is to boost the supply of goods and services. Policymakers can help by removing trade restrictions and other regulations that are sludging up supply networks, and by easing occupational licenses, permit requirements, zoning and land-use regulations, and other barriers that discourage people from working. COVID remains a wild card. More vaccinations will help, but if another variant emerges, people will be reluctant to continue opening up.”