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.
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.