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How the Biden administration and the Federal Reserve have responded to rising inflation

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Yahoo Finance's Rick Newman joins the Live show to discuss his take on how the Biden administration and the Fed have responded to rising inflation.

Video Transcript


JULIE HYMAN: Inflation concerns are, of course, escalating ahead of the Fed's upcoming meeting and after the CPI report that we got on Friday. There's also a new report out of the Wall Street Journal that says the Fed is now considering a larger than expected 75 basis point rate hike, leaving investors questioning how the Biden administration has handled record inflation.

Yahoo Finance's Rick Newman joins us now to discuss. And I think what people have been trying to puzzle through is not just the Biden administration, the Fed itself and so many others in the sort of economic complex misjudged this run-up in inflation.

RICK NEWMAN: Yeah, and what's new about this, I think, is there's now reporting on the decision makers, whether it's Janet Yellen at the Treasury, Jay Powell-- the Fed has acknowledged this. We messed up. And we're understanding why they messed up because they were looking at what happened after the 2008 and 2009 recession.

I mean, I think all of us here remember that. And the recovery from that was painfully slow. And that really hurt President Obama in the 2010 midterm elections, for example. People were wondering, where is this recovery? Well, the numbers are improving, but people are saying, I don't feel like things are getting very much better. And that was one of the shellackings that Biden's Democrats took in the midterm election.

So that's when Biden lost control of Congress, the Democrats lost control of Congress. So President Biden was there. He was vice president then. He came in. He remembers that very well. And his policymakers basically said in 2021, let's make sure that we don't make that mistake again. Let's supercharge--

JULIE HYMAN: So they made a different mistake.

RICK NEWMAN: They made a different mistake. Let's supercharge this recovery. And they actually did. I mean, the recovery in the unemployment rate or employment, I mean, it's been remarkable. We're practically back-- in terms of the unemployment rate, we're back at 3.6%, the lowest it got. Before, it was 3.5%. We still haven't gotten back all the jobs, but we will soon. So that part worked. They just didn't count on inflation because we haven't had inflation in 40 years. So they thought, oh, that's a thing in the past. Well, it's not.

BRIAN SOZZI: You know, Rick, I really liked your story on the Yahoo Finance home page now. And you're, of course, talking about gas prices, but there's not much the Biden administration can do about it. And prices might still go higher.

RICK NEWMAN: Right, so I just looked before I came on-- $5.10. I mean, we hit $5 two days ago, three days ago, and now we're at $5.10. And I've seen some forecasts saying, just based on the price-- the wholesale price of gasoline right now, this could hit $5.50 within a couple of weeks. Here's another thing I looked up just before I came on. Anybody remember what the price of gas was right before Russia's invasion of Ukraine?


RICK NEWMAN: Pop quiz.


RICK NEWMAN: It was-- well, it was close. You're close. It was under 4 bucks. It was about $3.60, between $3.50 and $3.60. It's now basically $5.10, so.

BRIAN SOZZI: And that was even high.

RICK NEWMAN: And that-- well, we thought that was high. I think we'd all be pretty happy to have $3.60 now. But so just since the Russian invasion of Ukraine, gas prices up $1.50 per gallon. That, I think you could call the Putin premium on gas prices because--

BRIAN SOZZI: Look at diesel.

RICK NEWMAN: Well, diesel's going up even more. And that's bad because that flows through into transportation for all goods. So that is causing inflation of other goods you don't think of as energy, but it takes energy to transport and make them. So there's not much. I mean, Biden has done what he could do. He's released oil from the Federal-- from the National Reserve, yeah.

JULIE HYMAN: Strategic Petroleum Reserve, yeah.

RICK NEWMAN: And, you know, he's going to put a little more ethanol in some oil-- that gas. And that's not going to make a big difference. We are hearing more serious conversation about waiving the federal gasoline tax. That's $0.185 a gallon. I guess that would help a little if they did that. But it's no guarantee consumers would get all of that $0.18. Some of that might go to the retailers or the wholesalers. So I don't know. I don't have any good news on this any time soon.

JULIE HYMAN: I mean, it might be a little easier to pay $5.10 a gallon if everything else wasn't also going up--


JULIE HYMAN: --at such an incredible rate. All right, Rick Newman, thank you.

RICK NEWMAN: Bye, guys.