The S&P 500 index fell 3.1 percent in February as the Russian invasion of Ukraine added to the growing list of uncertainties affecting markets. Oil spiked to more than $105 a barrel, while wheat jumped to its highest level since 2008 as Russia and Ukraine account for roughly 30 percent of all wheat exports. Prices for corn, iron ore, sunflower seeds, barley, among others produced in Russia and Ukraine rose in tandem.
This is happening at a time when inflation has been increasing for more than a year while the Federal Reserve has failed to act. We consider this reckless behavior. As recently as January 26, 2022, Federal Reserve Chairman Jerome Powell referred to “the relatively high-class problems” that come with the economic recovery, including “high inflation.” Inflation is running at a 40-year high, and real hourly earnings (meaning adjusted for inflation) have declined for 10 consecutive months.
The Fed has lost touch with reality. One day Fed Chairman Powell states inflation is a high-class problem, while another day he claims the Fed understands “that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food.”