On Thursday’s broadcast of MSNBC’s “Morning Joe,” Steve Rattner, who served as counselor to the Treasury Secretary in the Obama administration, predicted higher interest rates “for the foreseeable future,” and said that inflation isn’t declining in part due to people still spending the large amounts of stimulus they got during the pandemic. Rattner also stated that President Joe Biden was saved from himself by Congress failing to pass the inflationary Build Back Better plan.
Rattner said, “I think we’re going to have higher rates for the foreseeable future, but the economy itself is actually doing okay. … But first, let’s talk about rates. Obviously, inflation is the story of the moment, and that is what has been driving the Fed. … .75% increases are extremely large by Fed standards. And why are we doing that? Because…inflation, took off back in the early part of 2021, and the Fed essentially did nothing for almost a year. And so, it’s been having to play catch-up ball, and the other thing that is worrying the Fed…is that inflation isn’t coming down. It’s sort of sitting up there.”
He added, “Why is it not coming down? Here are a couple of reasons: First, we still have a huge number of unfilled jobs in this marketplace. … And then the second thing…is something we’ve talked about before, Joe, which is the excess savings in the economy. We poured roughly $2.5 trillion into Americans’ pockets during the pandemic, for lots of good reasons, including money they didn’t spend. We’ve been gradually working that off. But it’s still well over $1.5 trillion, almost $2 trillion. And so, consumers are still spending, even though their real incomes are going down. So, the economy is doing — we had a GDP report last week that showed the economy is growing at about 2.6%. So, — and back to the political discussion, there are good things to be said about the economy that somehow get lost in the whole inflation figure.”
Later, Rattner said, “[T]he Biden administration’s first rescue plan was probably too much, it came — we were already on the path to recovery from COVID. But it wasn’t what created 8% inflation. A lot of it was…the Fed put many more trillions into the economy than we did through the American Rescue Plan. And so, yeah, it’s not all on Biden.”
He added, “You have to say that Congress saved the president from himself. … If that bill [Build Back Better] had passed, it would have just added to all of this, it would have added to the deficits and the debt, it would have created an even bigger problem that we would have had to unwind. So, in a way, we got lucky that it all got dialed back to a sensible place.”
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