Increase in Gas Price Challenges US Economy

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Chief economist Jay Bryson said policymakers at the Federal Reserve expected the rise in inflation to be short-lived and unlikely to change that view based on the rise in energy prices, which are often volatile even in normal times. At Wells Fargo.

But that could be a more difficult problem for the Fed if rising oil prices make consumers and businesses believe that faster inflation will continue. Economic research shows that the prices of things that consumers often buy, such as food and gasoline, particularly outweigh inflation expectations. David Wilcox, a former Fed economist who is now a senior research fellow at the Peterson Institute for International Economics in Washington, said rising oil prices are raising the risk of a more permanent shift in expectations as public opinion polls show growing concern about inflation.

“I don’t expect the oil price to be the last straw on a camel’s back, but this is just another straw on a camel’s back and it already carries quite a load,” said Mr. Wilcox. “There is a much greater risk of inflationary psychology today than I said three to five years ago.”

Republicans seized on rising prices to criticize Mr. Biden’s energy policies. Revoke permits for Keystone XL oil pipeline and cease selling new oil lease contracts on federal lands, motion blocked by a federal judge.

“Bad policy creates conditions like high gasoline prices that we haven’t seen in a long time,” said Senator John Barrasso, a Republican from Wyoming. opinion letter last week. (Energy experts say Mr. Biden’s policies have had no significant impact on oil prices.)

Ms Psaki noted that Mr. Biden has consistently opposed an increase in the federal gas tax, which some Republican senators and business groups have advocated to help fund infrastructure spending. Biden’s deal with a bipartisan group of senators last month gas tax increase not included.

“Making sure Americans don’t carry a load at the pump remains a huge priority for management,” Ms Psaki said. “This is one of the main reasons the president was vehemently against the gas tax and the vehicle mileage tax, because he felt it would get on the Americans’ backs. And that was a bottom line red line for him. ”

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