US consumer prices have risen 7 percent in the past year, the most since 1982

On Tuesday, President Jerome Powell told Congress that the Federal Reserve was ready to accelerate the rate hikes it plans to begin this year if it deems it necessary to curb high inflation. Fed officials have estimated that they will raise their benchmark short-term interest rate, which is now linked to almost zero, three times this year. Many economists envision as many as four Fed rate hikes in 2022.

These interest rate hikes are likely to increase borrowing costs for home and car purchases as well as for business loans, which will potentially slow down the economy. The rate hikes also mark a sharp turnaround in policy from Fed policy makers, who as recently as September had been divided over whether to raise interest rates once this year. The Fed is also rapidly closing its monthly bond purchases, which were intended to lower long-term interest rates to encourage borrowing and spending.

Yet the Fed’s rapid focus has not dampened questions from many former Fed officials, economists and some senators about whether the Fed has acted too slowly to end its ultra-low interest rate policy in light of accelerating inflation – and put the economy in order. in danger as a result.

In his testimony to Congress Tuesday, Powell said the Fed mistakenly believed that supply chain bottlenecks that have helped drive up commodity prices would not last nearly as long as they have. Once the supply chains were loose, he said, prices would fall again.

Yet supply problems have persisted, and although there are signs that they are loosening in some industries, Powell acknowledged that progress has been limited. He noted that many cargo ships remain moored outside the ports of Los Angeles and Long Beach, the country’s largest, waiting to unload.

As the Biden administration faces public dissatisfaction with the rise in inflation, President Joe Biden has said its administration investments in ports, roads, bridges and other infrastructure would help ease inflation by loosening some convoluted supply chains.

Meanwhile, many restaurants have passed on some of their higher labor and food costs to their customers in the form of higher prices. So far, many consumers seem to be willing to pay more. Gene Lee, CEO of Darden Restaurants, which owns Olive Garden and other brands, recently told investors that this is “the toughest inflationary environment we’ve seen in years.”

The company said its food and beverage costs rose 9% during the quarter, and its hourly wage costs rose nearly 9% as it raised wages to attract workers. Darden said it, in turn, raised its prices by 2% over the quarter and expects to raise them by 4% over the next two quarters to help offset. Rick Cardenas, the company’s president and CEO, said the higher prices have not yet reduced consumer demand.

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