The Big Number: 0.25% or 0.33%? Democrats’ Inflation Reduction Act wouldn’t lower prices by all that much, analysts say

by | Aug 1, 2022 | Stock Market

The reviews are coming in for Senate Democrats’ Inflation Reduction Act of 2022, and some analysts are suggesting the $739 billion healthcare, energy and tax package won’t actually reduce inflation by a great deal. “We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024. We estimate a 0.25 percentage point fall in the PCE price index by the late 2020s,” said Penn Wharton Budget Model analysts in a report, referring to the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index.

“These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.” In a similar vein, Moody’s analysts said in a report that the legislation, unveiled last week by Sen. Joe Manchin of West Virginia and Senate Majority Leader Chuck Schumer will “modestly reduce inflation over the 10-year budget horizon.” “By the fourth quarter of 2031, the consumer price inflation index will be 0.33% lower because of the legislation,” said the Moody’s team, led by Mark Zandi. “Through the middle of this decade the impact of the legislation on inflation ismarginal, but it becomes more meaningful later in the decade.” The Biden administration, on the other hand, has talked up the inflation-fighting power of the bill and called for Congress to pass it. “Leading economists agree that this legislation would be an important step forward in fighting inflation and addressing some of our nation’s mo …

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