US’ historic inflation rise: How experts reacted

Consumer prices increased by 7.5% this month, the highest
year on year increase since February 1982, reported the US Labor Department.
Shortage of supplies and workers, heavy amounts of federal help, ultra-low
interest rates, and strong consumer spending combined to drive inflation higher
in the past year.

In December and January, inflation was 0.6% the same as
the previous month. Prices increased by 0.7% from October to November 2021 and
they increased 0.9% from September to October 2021.

Also Read | Joe Biden to split frozen Afghan funds for 9/11 victims, relief

The inflation rate is unlikely to slow significantly in
the near future. Several factors have driven prices higher since last spring,
including the fastest wage growth in at least 20 years. Last month, hundreds of
workers were out of work at the nation’s busiest ports, Los Angeles and Long
Beach. As a result, many products and parts are in short supply.

Also Read | As Freedom Convoy chokes carmakers, US urges Canada to use federal powers

Experts have reacted strongly to the announcement made by
the US Labor Department on February 10.

Mohammad Aly El-Erian, president of Queen’s College
Cambridge and chief economic adviser at Allianz, said the most vulnerable
segments of the society are being hit hard by inflation and also at the risk of
income shock due to a policy error.

Also Read | Biden asks Americans to leave Ukraine: Things could go crazy quickly

Peter Schiff, an American broker and CEO, Euro Pacific
Capital, said a more aggressive Fed will actually make the inflation problem
worse, even if stocks go into a bear market and the economy is tipped into
recession. Growth does not cause inflation, and recession does not cure it.
Inflation will increase with a weaker economy.

Uday Kotak, managing director of Kotak Mahindra Bank said
that with 7.5% inflation and 0% interest rate, you would think it is an
emerging economy with poor governance but it is the United States of America.
He warned that “When the US sneezes, the world catches a cold”. In 2013, India
paid the price for its tantrums but not this time, he warned.