NPR’s Sarah McCammon spoke with College of Wooster Alumnus and Trustee Emeritus Donald Kohn ’64, former vice chair of the Federal Reserve Board of Governors and a senior fellow at the Brookings Institution, about the latest economic data on inflation, and the outlook for the economy on Morning Edition this morning. According to NPR’s chief economics correspondent Scott Horsley, an increase in consumer demand is putting pressure on prices, and inflation is making its sharpest increase in more than a decade.
“The Fed has a story and analysis of these inflation data that it’s going to stick to. And that analysis is these are temporary inflation pressures,” Kohn said. He added that the key word used is “transitory” and that as the economy starts to bounce back and recover from the pandemic, the pressures on pricing result from an increase in demand and constraints on the supply chain. “By the effects of the pandemic, people are slow getting back into the labor force, putting pressure on wages, and demand and those things will ease over time. The Fed is expecting this high inflation to continue a little while, but then to ease back off towards a more normal 2%.”
Kohn, a graduate of Wooster’s economics program and 40-year veteran of the Federal Reserve System, added that “The Fed will have to keep a close watch on whether the increase in supply, the re-channeling of supply chains, and people re-entering the labor force, happen as they expect, and therefore take the pressure off the wages and prices.”
While Kohn expects that consumers will see price increases continue a few more months, he expects pressures to ease, and prices to stop rising so rapidly. He explained that price increases on cars for example, have been related to the response to cuts in supply chains like the chip shortage. “Some prices are just catching up to where they were in January, February 2020, hotels, airline fares restaurant meals, and I think we can expect to see a push up there and then kind of a leveling off.”
Hear the full clip with Kohn on NPR: https://www.npr.org/2021/06/11/1005418958/price-increases-may-continue-for-a-few-more-months-ex-fed-official-says.