The United States has just hit a “significant milestone” in the battle to bring down inflation, President Joe Biden’s chief economic adviser said Friday.
Earlier Friday, the Commerce Department released data showing that a closely watched inflation gauge had cooled beyond what economists were expecting and that prices fell on a month-to-month basis for the first time since April 2020.
“We’re closing out the year with inflation on a six-month basis at 2% — the pre-pandemic benchmark,” said Lael Brainard, the former Federal Reserve vice chair who now heads the National Economic Council, during a call with reporters on Friday. “This is a significant milestone. If you think about where we were just a year ago, it is worth reflecting on just how much progress has been made.”
She added: “Inflation has come down faster than even the more optimistic forecasts, and that has happened in the context of ongoing solid growth and strong employment.”
Inflation’s continued downward trajectory in the broader context of robust economic growth fuels confidence that the US economy can achieve the proverbial “soft landing” of reining in inflation without massive job losses, Brainard noted, adding that the “landing strip has widened.”
Wages and wealth have increased, and Americans and their economy are in better position than initially projected, Brainard said. Still, there remain plenty of potential threats that could endanger that path, she added.
“The economy is resilient, consumers are resilient, the job market is resilient; however, there are risks, of course, to the outlook, and we have to be vigilant to those right now,” she said. “Perhaps geostrategic risks are the most obvious, but we are alert to potential risks, always.”
In addition to the ongoing Russian invasion of Ukraine that has continued to affect grain markets, Brainard noted that the administration is staying focused on developments in the Red Sea.
Yemen’s Houthi militants have escalated attacks on commercial ships, forcing shipping companies to divert vessels from the Suez Canal to around the southern tip of Africa and increasing fears that inflation and oil prices may rise as a result.
“Those are important shipping lanes, and the president’s national security team is closely monitoring the situation,” Brainard said. “They are in constant communication with oceanshippers, with the industry and other stakeholders as well as working closely with countries from the region to ensure freedom of navigation and to bolster regional security.”
At this time, the rerouting of container vessels is not expected to have a large effect on the availability of products, she said.
Separately, on the topic of US Steel’s plans to be acquired by Japan’s Nippon Steel, Brainard reiterated comments issued yesterday by her and others in the Biden administration that the deal would receive “scrutiny.”
“Because of the national security and critical supply chain importance of the steel sector, deals such as this one deserve serious scrutiny,” she said. “We also say that we welcome investment from around the world, and of course we’ve seen record foreign direct investment into the US to participate in this great manufacturing revival that we’re seeing.”
