Late on Tuesday, Bloomberg conveyed comments from JPMorgan Chase & Co. economists suggesting that the Inflation Reduction Act will have “almost no effect” on price growth that’s currently running at the fastest pace in four decades.
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The landmark tax, climate and health-care bill, which passed the Senate on Sunday and is headed for the House on Friday, puts a slimmed-down version of President Joe Biden’s domestic agenda on a path to becoming law after a year of Democratic infighting that the White House was unable to control.
The nonpartisan Congressional Budget Office, the Committee for a Responsible Federal Budget and the Penn Wharton Budget Model all found that the legislation will have a minimal influence on inflation, which climbed an annual 9.1% in June.
‘The aggregate demand impulse is trivial,’ Michael Feroli, JPMorgan’s chief US economist, wrote in a note Tuesday. ‘Moreover, we believe the drug-pricing provisions will have little near-term impact on the CPI,’ he said, referring to the consumer price index.
‘If there are longer-run beneficial effects for the supply side of the economy — as its backers claim — that’s a growth issue, not an inflation issue: in the long-run inflation is determined by Fed policy,’ Feroli wrote.
The law is estimated to reduce the federal budget deficit by about $300 billion over the next decade. For the fiscal year that starts Oct. 1, the narrowing in the gap is seen at $18 billion, or less than 0.1% of gross domestic product, Feroli said.
Also read: Forex Today: Market players on their toes ahead of US inflation data
