US Personal Consumer Spending Hits Record High, Stanford Economist Says Fed Should Raise Rates Above 9% – Economics Bitcoin News

On July 29, the US Bureau of Economic Analysis reported the US Personal Consumption Expenditure (PCE) price index for the month of June, and the number saw the largest 12-month increase since 1982. On the same day, Stanford University’s Senior Fellow at Hoover Institution and economics professor John Cochrane said the Federal Reserve should raise interest rates above 9% to tame inflation.

The PCE price index increased 4.8 percent from a year ago

The US economy continues to look bleak every time a new economic report or data is released to the public. In mid-July, the Bureau of Labor Statistics Consumer Price Index (CPI) report was released, and it revealed that June’s CPI data reflected a record 9.1% year-over-year increase. On July 27, the US Federal Reserve raised the federal funds rate by 75 basis points (bps) to help curb red-hot inflation.

Two days later, the Bureau of Economic Analysis (BEA) released the closely watched index data for personal consumption expenditures otherwise known as PCE. The PCE index saw its biggest 12-month jump rising 6.8% in June, an increase not seen since January 1982.

“From the same month a year ago, the PCE price index for June increased 6.8 percent,” the BEA report details. “The prices of goods increased by 10.4 per cent and the prices of services increased by 4.9 per cent. Food prices increased by 11.2 per cent and energy prices increased by 43.5 per cent. Excluding food and energy, the PCE price index increased by 4.8 percent from a year ago, the authorities write. The BEA plans to release results from the National Economic Accounts annual update on September 29.

Professor of economics at Stanford University believes that a gold or bitcoin standard will not work

On the same day, economist John Cochrane did an interview with Kitco’s news desk and said that the US Federal Reserve should raise interest rates higher than 9%. Cochrane further noted that a gold or bitcoin standard would not be able to control inflation. The Stanford University economics professor said the “consensus view” was that the Fed should raise interest rates “substantially above” the 9% region.

“That means that right now with 9 percent inflation, economists are talking about 10, 11 or 12 percent interest rates to bring [prices] down,” Cochrane noted. “I think the Fed and the markets are counting on a lot of inflation to go away on its own without interest rates having to go quite that high,” Stanford economist told Kitco News anchor David Lin.

Lin also asked Cochrane about a gold standard or a bitcoin standard used to control inflation. “Sorry, no,” replied the economist. “Under the gold standard there was a lot of inflation and deflation. 10 or 20 percent ups and downs of inflation and deflation, but each inflation was then matched by a deflation. I’m sorry, we’re not going back to gold.” Cochrane believes that the Fed must implement tighter fiscal policy to combat inflationary pressures.

As for a bitcoin standard, Cochrane said it was a terrible idea and insisted that bitcoin (BTC) is “worthless.” “It’s a terrible idea,” Cochrane said in his interview with Lin. “As far as financial technology goes, Bitcoin is an attempt to revive gold, something intrinsically worthless that people only hold onto because it’s rare…Bitcoin is also very bad at carrying out transactions itself, since it’s so computationally intensive. ” Cochrane concluded:

The best answer is that our governments should start conducting prudent fiscal and monetary policies, and pay more attention to keeping inflation under control.

What do you think of the latest PCE data and economist John Cochrane’s opinion? Do you think improved fiscal and monetary policy can help tame US inflation? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the news editor at Bitcoin.com News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for Bitcoin.com News about the disruptive protocols emerging today.