Moodys: ‘Build Back Better’ Won’t Add to Inflation

Written by SK Ashby

Like many of you, I'm being buried under the rising cost of food and inflation is a very real concern of mine, but the $1.75 trillion "Build Back Better" reconciliation bill slowly lumbering through Congress will not add to inflation.

Republicans have pointed fingers at the White House and said big spending plans are the reason why the price of everything has increased, but economists at Moody's Analytics and Fitch Ratings say the reconciliation bill will actually place downward pressure on inflation because it will grow the labor force over a long period of time.

From Reuters:

The two pieces of legislation "should not have any real material impact on inflation", William Foster, vice president and senior credit officer (Sovereign Risk) at Moody's Investors Service, told Reuters. [...]

"The bills do not add to inflation pressures, as the policies help to lift long-term economic growth via stronger productivity and labor force growth, and thus take the edge off of inflation," said Mark Zandi, chief economist at Moody's Analytics, which operates independently from the parent company's ratings business.

Charles Seville, senior director and Americas sovereigns co-head at Fitch Ratings, said the two pieces of legislation "will neither boost nor quell inflation much in the short-run."

This is not going to change the hearts and minds of any Republicans, of course, but it may make a difference in the offices of Senator Joe Manchin.

Combined with a Congressional Budget Office (CBO) score that will likely say the same thing as Moodys and Fitch, Manchin is going to run out of things to say he's waiting for.

I understand that this is all part of the "process" he has called for respecting, but we're nearly at the end of it.