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People shop for groceries in Riverside, California on September 28, 2022.

People shop for groceries in Riverside, California on September 28, 2022. (Photo: Watchara Phomicinda/MediaNews Group/The Press-Enterprise via Getty Images)

Fed Critics Say New CPI Data Shows Rate Hikes Can't Stop 'Rampant Corporate Profiteering'

"The Fed's overly aggressive actions are shoving our economy to the brink of a devastating recession," said one economist.

Kenny Stancil

As data released Thursday shows inflation kept climbing in September even after the U.S. Federal Reserve raised interest rates yet again, progressives reiterated that the nation's central bank is ill-equipped to tackle the root causes of rising prices and urged Congress to rein in corporate greed before further rate hikes throw millions of people out of work and help crash the global economy.

"It's time for Chair Powell and the Fed to step aside and for Congress to step in."

According to the Bureau of Labor Statistics, the overall consumer price index (CPI) rose 0.4% last month and is up 8.2% from a year earlier. The monthly increase was driven by soaring rent, grocery, and healthcare prices. The annual rate of change has been fueled largely by historic spikes in the cost of food and energy, which critics attribute to price gouging and the destabilizing effects of the Covid-19 pandemic, the war in Ukraine, and the climate crisis on global supply chains.

Core CPI, which excludes food and energy, increased 0.6% for a second consecutive month and is up 6.6% compared with last year, reaching its highest level since 1982.

"Today's inflation report is proof of what we've been saying for months: Raising interest rates isn't working," Rakeen Mabud, chief economist at the Groundwork Collaborative, said in a statement.

"Supply chain bottlenecks, a volatile global energy market, and rampant corporate profiteering can't be solved by additional rate hikes," Mabud continued. "The Fed's overly aggressive actions are shoving our economy to the brink of a devastating recession."

While core CPI reached a 40-year high last month, corporate profit margins are also at record levels.

As Sarah Baron, campaign director for the advocacy group Unrig Our Economy, detailed in a Wednesday column at OtherWords, companies are boosting their profits by keeping prices artificially high:

General Mills hiked its prices five times since June of 2021 alone, and the company saw its net earnings climb 31% to $820 million in the first quarter of the 2023 fiscal year. Darden Restaurants, the company which owns popular chains such as Olive Garden and Longhorn Steakhouse, saw its net sales increase by $140 million to over $2.4 billion in the first quarter of FY 2023. As AutoZone saw record sales growth over the past two years, with net income increasing to $810 million, their CEO admitted the company is not racing to lower prices. Instead, they boosted their shareholder handouts by spending $1 billion on stock buybacks during the quarter, bringing their total to $4.4 billion during FY 2022.

During Monday's meeting of the National Association for Business Economics, Fed Vice Chair Lael Brainard acknowledged that "large increases in retail trade margins in several sectors" is a significant factor behind surging prices.

"The return of retail margins to more normal levels," said Brainard, "could meaningfully help reduce inflationary pressures in some consumer goods."

Nevertheless, Fed Chair Jerome Powell has indicated that the central bank's plan for reducing prices is to depress consumer demand by continuing to raise interest rates to drive up unemployment and push down wages.

Thursday's CPI report has only intensified expectations of further rate hikes, with investors anticipating more turbulence in financial markets. Meanwhile, Labor Department data also published Thursday shows that jobless claims rose last week for the second consecutive week, and researchers are warning of more impending layoffs.

Provoking a recession that causes an estimated 1.5 million Americans to lose their jobs by the end of next year and undermines the bargaining power of labor is, according to Powell's estimation, acceptable if it tames inflation.

But as Mabud and others have argued, including in front of House lawmakers last month, the blunt instrument of interest rate hikes leaves the underlying causes of supply shortages and profiteering unaddressed.

It is possible to curb skyrocketing prices without hurting workers by intentionally plunging the nation—and potentially the world—into a recession, progressives contend, if Congress takes action.

"The inflation crisis we're facing today is due to decades of deregulation and privatization—resulting in brittle supply chains that can't handle shifts in our economy without supply shortages and bottlenecks," Mabud recently told members of the House Committee on Oversight and Reform. "A ruthless pursuit of efficiency and short-term profits... left us vulnerable to profiteering and price increases."

"Giant corporations' control over our supply chains has supplanted the functioning, resilient system we could have built through robust public investment and free and fair competition," she continued. "Big corporations are getting away with pushing up prices to fatten their profit margins, and families are quite literally paying the price. It's time to rein them in."

During the same hearing, former U.S. Labor Secretary Robert Reich urged Congress and the Biden administration to confront corporate profiteering directly through a windfall profits tax of the sort introduced months ago by Sen. Bernie Sanders (I-Vt.), stronger antitrust enforcement, and temporary price controls.

In her Thursday statement, Mabud said, "Now that Fed officials are finally recognizing the role of profiteering, it's time for Chair Powell and the Fed to step aside and for Congress to step in."

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