Amid a heated debate in Washington, DC, whether government spending is fueling a surge in inflation, new research by the Federal Reserve Bank of San Francisco suggests the Biden administration’s latest stimulus package is helping to spike prices.
According to a report by the San Francisco Fed Monday, the “later timing and size” of the US bailout – the latest stimulus package passed in March – has fueled debate over whether it is overheating the economy and fueling sustained spikes in inflation .
At the time the latest bailout plan was adopted, the report said the economy had “at least partially recovered from the pandemic” and was in the midst of a “strong” recovery.
The San Francisco Fed assessed the state of the labor market by analyzing the job vacancy to unemployment ratio and finding that the Biden administration’s latest financial plan temporarily raised this metric.
This, in turn, will drive inflation up by around 0.3% per year in the short term through 2022, the report concludes.
So the latest bailout package has had some impact on inflation, according to the San Francisco Fed, but the authors assume it will only be temporary.