San Francisco Federal Reserve undercuts Biden's narrative on inflation — and no, it's not Putin's fault

The San Francisco Federal Reserve published a study this week that appeared to contradict President Joe Biden's narrative about inflation.

What is the background?

Americans are battling historic inflation and growing economic woes that appear to have no end in sight. In fact, the latest report from the Bureau of Labor Statistics showed the consumer price index has increased 7.9% over the past 12 months.

Unfortunately, the buck does not stop with Biden. The president has blamed inflation and other economic problems on COVID-19, the supply chain, and even Russian President Vladimir Putin and the war in Ukraine.

What does the report say?

The study sought to understand why U.S. inflation is increasing at a much higher rate than other advanced economic countries.

The reason? The economists pointed toward COVID-19 relief bills, which pumped the economy, and Americans' pockets, full of income. In fact, they argued the stimulus bills account for about 3% of inflation.

"Since the first half of 2021, U.S. inflation has increasingly outpaced inflation in other developed countries," the study said.

"Estimates suggest that fiscal support measures designed to counteract the severity of the pandemic’s economic effect may have contributed to this divergence by raising inflation about 3 percentage points by the end of 2021," the bankers explained.

Without the massive COVID relief bills, the economists suggested the U.S. could have experienced deflation, which has benefits and drawbacks. Still, they argued the impacts of deflation "would have been harder to manage," a comment that should be taken with a grain of salt considering the government is having a difficult time managing the inflation crisis.

Importantly, the study failed to conclude that Putin is to blame for inflation.

Anything else?

Because of inflation, Americans will spend approximately $5,200 more than last year, Bloomberg reported.

Inflation will mean the average U.S. household has to spend an extra $5,200 this year ($433 per month) compared to last year for the same consumption basket, according estimates by Bloomberg Economics. The excess savings built up over the pandemic, and increases in wages, will cushion those costs, and allow spending to expand at a decent pace this year. But accelerated depletion of savings will increase the urgency for those staying on the sidelines to join the labor force, and the resulting increase in labor supply will likely dampen wage growth.

According to a recent NBC poll, a "plurality of Americans" blame Biden and his policies for inflation, while they overwhelmingly reject Russia's culpability for America's economic woes, NBC News reported.