The political peril that Biden didn't see coming

The rapid reopening of the economy this summer led to massive price hikes for travel services, used cars and other goods that were initially dismissed as fleeting phenomena. But the inflation spike now appears to be on track to persist deep into 2022, when midterm elections will determine who controls Congress, as clogged supply chains, labor shortages and unabated consumer demand push costs even higher.

“Higher inflation is reasonably likely through at least next year,” said Jason Furman, a top economic adviser to former President Barack Obama who is close to the Biden administration. “And once you’ve had two years in a row of higher inflation, it may take on some momentum of its own.”…

The Federal Reserve Bank of New York said Monday that Americans’ short- and medium-term inflation expectations are at their highest levels since it launched the Survey of Consumer Expectations in 2013. And the International Monetary Fund noted “great uncertainty” surrounding where inflation is headed in its World Economic Outlook this week and said the risk is that it could be worse than anticipated.

“I’m pretty worried,” former Treasury Secretary Larry Summers, who has been warning of an inflation problem for months, said at an Institute of International Finance conference on Wednesday. “I think we’re looking at a very difficult situation on inflation.”