Economics professor warns October's inflation victory is 'too early,' tries putting a 'political drag' to bed
October CPI cooler than expected, prices climb 7.7% year-over-year
Brian Brenberg: October's inflation celebration 'is too early'
Fox News contributor and The King's College economics professor Brian Brenberg gives the 'Eeyore' analysis on October's CPI report.
While markets may be giddy to see a Federal Reserve pivot after a cooler-than-expected inflation report, one economics professor is providing the "Eeyore" analysis on October’s consumer price index (CPI).
"There's a political bias to declare victory really early so that this issue can get put to bed as a political drag," Fox News contributor and The King’s College professor Brian Brenberg told Fox News Digital Thursday. "But the fact is, economically, we have a very, very, very long way to go with this. And if we pull up early, we risk causing the problem to go on a very long time."
On Thursday, The Labor Department said the CPI, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 0.4% in October from the previous month. Prices climbed 7.7% on an annual basis.
Those figures were both lower than the 8% headline figure and 0.5% monthly increase forecast by Refinitiv economists, a potentially reassuring sign for the Federal Reserve as it tries to tame runaway inflation with a series of aggressive interest rate hikes. It marked the slowest annual inflation rate since January.
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But with a sign of a declining inflation rate, markets showed indications Thursday that investors are anticipating a Fed rate hike pivot. The Dow Jones Industrial Average climbed more than 700 points; the S&P 500 jumped 3.3%; while the NASDAQ Composite surged more than 4.5%.
The Biden administration "has demonstrated at the outset that it didn't want to acknowledge the inflation problem," Fox News contributor Brian Brenberg told Fox News Digital. (Fox News)
"You look at all the market response to this, these guys, all they want to see is the Fed say, ‘You know what, we're done tightening the screws,’" Brenberg said. "I think the market here is a lot of cheering going on right now. But I don't think that's indicative of the risk still to Main Street if inflation persists well into next year and beyond."
The economist expressed that the Fed is likely to stick with its plan to raise rates by 50-basis points in December, and claimed the "real" cause of inflation is a lack of supply in the market.
"You've got to get productivity back up. You need supply chains back up, which means you need a lot more investment in that space and entrepreneurship in that space," Brenberg explained. "You can crush demand to get inflation down a few points, but to get it back down to 2%, a really, truly healthy economy, you've got to get the supply side of this economy going... That is the real fundamental issue that this economy has."
Brenberg also raised concerns about the Fed’s ability to do its job when facing pressures from an administration "that has demonstrated at the outset that it didn't want to acknowledge the inflation problem."
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"What ends up happening as you get a lot of pressure politically on the Fed to start reversing course, to pivot," Brenberg said, "is instead of really fixing this problem, you start to back off and we don't end up with peak inflation of, let's say that 8 to 9% that we've seen, but we end up stuck in this range of 5% inflation."
A dragged-on inflation phase would be a "killer" to Main Street, Brenberg further argued, while cautioning that the government spending plans Biden has teed up over the last two years will go into effect in 2023.
The professor added that a political gridlock by Republicans would play a "limited role" in pulling back on fiscal stimulus to the economy.
"There's a lot of spending that's going to happen no matter what because of the decisions that have been made over the past two years that already exert inflationary pressure," Brenberg said. "Biden's done damage that in this environment, nobody can reverse, basically. There's damage nobody can reverse that's going to play out now next year and into the following year. The damage that Republicans can help limit is how much new spending happens."
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As the Fed continues down its tightening path, Brenberg advised that the bank’s chairman needs to put his eye "back on the ball."
"Your job is not to listen to the politicians. Your job is not to be popular. Your job is to get inflation back to the level that no longer harms families and workers the way it has now," he said. "You can't play politics. You need to do the best job you can on economics."
FOX Business’ Megan Henney contributed to this report.