Sully: Is stimulus is a breeding ground for inflation?
SAN DIEGO (KUSI) – KUSI Contributor and radio host Sully Sullivan joined Good Morning San Diego to discuss why economists don’t expect trillions of dollars in economic stimulus to create inflation.
Congress has passed trillions of dollars in stimulus funding, with more likely on the way.
“As a result, the infusion of cash into the financial system has renewed concerns that inflation could surge and there is a historical chart going back to 1943 that show that following a correlation with increased money supply aka stimulus and high inflation,” according to Sully.
The last time we saw a stimulus like this was 1943 – WWII and inflation rose to close to 20% but many economists say the link between money creation and consumer prices has weakened in recent years.
Sully says U.S. consumer prices dropped for three consecutive months before rebounding in June and the latest projections from Federal Reserve policymakers show inflation will stay below the central bank’s 2% target over the next two years.
Spending does not match the level of stimulus since only $1200 went to consumers the rest went to business stimulus. “In other words, the $1,200 stimulus checks from the federal government were not big enough to stoke inflation,” said Sully.