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Key Inflation Gauge Posts Fastest Annual Price Gain In 30 Years Some economists have expressed concerns that if prices accelerate too fast and stay high for too long, expectations of further price increases will take hold, driving up demand for wages and potentially triggering the kind of wage-price spiral that plagued the economy in the 1970s.

By The Epoch Times Edited by Charles Muselli

Opinions expressed by Entrepreneur contributors are their own.

Consumer prices, excluding the volatile food and energy components, soared well beyond the Federal Reserve's 2 percent target in the year to June, reaching levels not seen since 1991 and reinforcing concerns about inflation.

The so-called core personal consumption expenditures (PCE) price index, which excludes food and energy and is the Fed's preferred method for gauging inflation, rose 3.5 percent in the 12 months to June, after rising 3.4 percent in the year to May, the Commerce Department said on Friday. The last time the core PCE inflation gauge saw a similar year-over-year vault was in July 1991.

The Fed looks to core PCE as the key inflation gauge that informs its monetary policy, which has an inflation target of a longer-run average of 2 percent.

While some economists have raised the alarm on inflation, Fed officials and members of the Biden administration have insisted that price rises are temporary, arguing that inflationary pressures will ease as pandemic-related supply chain disruptions are ironed out.

Fed Chairman Jerome Powell told reporters on July 28 (pdf) that it's possible inflation could run hotter and for longer than Fed analysts expect.

"The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic," Powell said. "As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect."

But Powell reiterated his oft-repeated view that, in the next year or so, inflation will return closer to the central bank's target of 2 percent.

"If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we'd be prepared to adjust the stance of policy," he said.

On July 28, the Fed kept its overnight benchmark interest rate near zero and left its massive asset purchase program unchanged, with Powell saying at the press conference that the U.S. economy is still a ways away from making "substantial further progress" towards the Fed's dual mandate of price stability and maximum employment.

Economists and investors have widely shifted their spectrum of concerns from slow growth, high unemployment, and deflationary pressures at the beginning of 2021, to inflation.

"You can't speak to anyone in the investment field without having the fear of inflation come to the forefront," said Robert R. Johnson, Professor of Finance, Heider College of Business, Creighton University, in an emailed statement to The Epoch Times.

Some economists have expressed concerns that if prices accelerate too fast and stay high for too long, expectations of further price increases will take hold, driving up demand for wages and potentially triggering the kind of wage-price spiral that plagued the economy in the 1970s.

Meanwhile, more than 80 percent of Americans are concerned about inflation, according to a survey by Skynova, which also indicated that 61 percent feel inflation will negatively impact their lifestyles.

By Tom Ozimek

Follow Tom on Twitter: @OZImekTOM

The Epoch Times, founded in 2000, is headquartered in Manhattan, New York, with a mission to provide independent and accurate information free of political bias or corporate influence. The organization was established in response to censorship within China and a lack of global awareness regarding the Chinese regime's repression of the spiritual practice Falun Gong.

The Epoch Times is a widely read newspaper that is distributed in 33 countries and is available in 21 languages. The publication has been critical in providing balanced and detailed reporting on major global events such as the 2003 SARS pandemic and the 2008 financial crisis. Notably, the organization has played a key role in exposing corruption inside China.

Aside from its human rights coverage, The Epoch Times has made significant contributions in a variety of fields. It has received praise for its in-depth analysis and expert perspectives on business, the economy and U.S. politics. The newspaper has also received praise for its broad coverage of these topics.

A series of editorials titled "Nine Commentaries on the Communist Party" appeared in The Epoch Times in 2004. It asserts that freedom and prosperity in China can only be achieved by eliminating the Communist Party, which violated China's cultural and spiritual values. In addition, the organization led the Tuidang movement, which resulted in over 400 million Chinese citizens quitting the Communist Party. In spite of this, 90% of websites referring to the "Nine Commentaries" were blocked by the Chinese regime.

The Epoch Times has been at the forefront of investigating high-level corruption cases within the Chinese regime, with its reporters taking significant risks to uncover these stories. The organization has received several awards for its investigative journalism.

The organization has received several awards for its investigative journalism. For more, visit www.theepochtimes.com.

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