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Is there evidence that the latest economic relief package is rekindling inflation?

Saturday, March 20, 2021
By Lauralei Singsank
NO

President Biden signed a $1.9 trillion coronavirus relief package into law on March 11, so it is too soon to know its impact on inflation. On March 10, the Bureau of Labor Statistics reported that consumer prices in February were up 1.7%, below the Federal Reserve’s long-run target of 2%.

A period of prolonged low inflation has challenged assumptions formed in the 1970s about the impact of large deficit spending on inflation and unemployment. Some “inflation hawks” are warning of new risks, while other economists note the unique nature of the downdrafts from the pandemic. A White House economic adviser, Bharat Ramamurti, said that “the risk of doing too little to help American families outweighed the risk of doing too much” in determining the size of the relief programs. Fed Chairman Jerome Powell said that he expects that any inflationary effect would be “transient.”

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