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Inflation hit a new high last month. Here's how it's changing life in the U.S.

STEVE INSKEEP, HOST:

You know how you're not supposed to be driving with things in your hands, you're supposed to be driving hands free? You're not supposed to juggle your phone at the same time because it's unsafe to do two things at once. The Federal Reserve is assigned to do two things at once, hold down inflation and hold up employment. That double mission is hard because attacking inflation can hurt the economy. And it's relevant just now because inflation is up. Anything from eggs to men's suits to health insurance can cost more. So how can the Fed bring down inflation without also crashing the car? William Spriggs is chief economist for the AFL-CIO and a professor at Howard University. Welcome.

WILLIAM SPRIGGS: Thank you for having me this morning.

INSKEEP: OK. So the Fed is raising interest rates and taking other steps. Are they attacking the cause of inflation, though?

SPRIGGS: No, they aren't. The cause continues to be the volatile area of food and energy. And this was the point the president was making yesterday in responding to the numbers, because, as we know, the price of gasoline at the pump has been falling in the last couple of weeks. That's not in these numbers. And that just shows how volatile the numbers can be in telling the story. The source of that price hike in energy and in food, of course, we know comes from the disruption from Russia and its invasion of Ukraine. Core inflation was up, those things that aren't food and energy, mostly in services. A lot of that had to do with airline fares, a huge jump in airline fares. So that we know is volatile.

And people have been hearing reports about the problems that airlines have been having in trying to recover back to their pre-pandemic level. They're getting people back on planes, but raising fares as a way to make sure they get their revenue back.

INSKEEP: Yeah, so a lot of different things are happening. Then the Fed raises interest rates. It's not directly attacking any of these problems. But can it help with inflation itself somehow?

SPRIGGS: No. It could, in fact, exacerbate the situation. We finally got the inflation problem for cars under control. But that has to do with the auto industry struggling to get chips. And so think about, if you tame inflation, if you try and keep people from buying cars, you make it harder for the auto industry to put in orders and get the chips. And of course, their supply chain was so fragile they needed to find new suppliers. That's going to increase their cost, but it'll make their industry more sustainable in terms of their supply chain. And we need industry to find more sustainable supply chains. We now know that it's too fragile. But you mentioned eggs, which were up a lot. But we know that we had a big problem from the bird flu, which the Fed cannot do anything about the bird flu.

INSKEEP: I feel I'm hearing you saying that it's possible the Fed will impose the pain of higher interest rates on people without getting any particular benefit of lower inflation out of it.

SPRIGGS: That's what I'm saying. Now, it has helped with home prices. It's not clear how it's going to help with rent and for people who aren't homeowners - that was one of the spikes, in those who are paying rent - because we need a bigger supply of housing in order to address the rent crises. And higher interest rates make it more difficult, makes it more expensive to respond to a shortage of housing because it's more expensive to build the apartment buildings.

INSKEEP: What if Jerome Powell, the Fed chairman, called you up and said, OK, I heard you on NPR. You're complaining. You don't like my approach. What would you have me do? What would your answer be to him?

SPRIGGS: Right now, I think he needs to help the American people understand the source of inflation so that we have the political space to address it. We have to address the supply shortage. And that takes fiscal policy, the types of things that President Biden has been proposing. Firms still complain they would like more workers. But you have to provide child care so workers can come to work. But if you keep telling people the problem is demand, then you're not going to have the space for the government to say, OK, let's spend money and let's increase the supply.

The legislation to get more chip manufacturing here in the United States, which we understand needs to take place, that has stalled because people believe, well, if the government spends money to help more chip manufacturing, that's going to stoke inflation. He needs to help people understand the situation so that there's fiscal space to respond to it.

INSKEEP: In about 10 seconds, do you see a recession coming soon?

SPRIGGS: Oh, I hope not. The labor market looks very strong. But if the Fed continues to raise interest rates, it's going to stall those sensitive areas, like autos.

INSKEEP: Mr. Spriggs, thanks very much. It's always a pleasure.

SPRIGGS: Good to hear from you.

INSKEEP: William Spriggs is chief economist for the AFL-CIO. Transcript provided by NPR, Copyright NPR.