• 2 months ago
During a House Financial Services Committee hearing prior to the Congressional recess, Rep. Ann Wagner (R-MO) spoke about 'shrinkflation'.

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Transcript
00:00Next, the gentlewoman from the great state of Missouri,
00:05Congressman Wagner, is now recognized for five minutes.
00:08I thank you, Mr. Chairman,
00:10and in keeping with baseball analogies here,
00:13I think I'm batting cleanup.
00:15Chairman Powell, welcome this afternoon to you.
00:18Chair Powell, in your testimony, you stated that, and I quote,
00:22longer term inflation expectations appear
00:25to remain well anchored.
00:29Could you please expand on that for us?
00:32Sure. So, in our thinking, and the thinking of economists
00:36and central bankers, what the public expects
00:38about inflation is really important,
00:40because if you expect there to be low inflation,
00:43then it probably will be low, because you're going
00:45to make sure that's true in your daily decisions.
00:48So, we measure them, you know, we survey individuals
00:51and businesses and market participants.
00:54And then we look at market-based,
00:56you can also derive market estimates
01:00of what inflation will be through various instruments
01:03of the markets, and all of those suggest that people expect
01:07inflation to be right around 2% over the longer term.
01:10And that's been very stable right through this episode.
01:13When you say longer term, sir,
01:14how many years would you be estimating?
01:18One year, three year, five year, is there any?
01:20So, we look at short and medium term inflation
01:24expectations, too, and they tend to be more volatile,
01:26because, you know, when inflation's high,
01:28people think that it'll last a few years.
01:30But one standard thing is to look at five year,
01:33five year, which is between year five and year 10.
01:36That's a standard way to look, or longer term than that.
01:40If you ask, you just ask people in surveys
01:42over the longer term, you maybe don't specify,
01:44but they all give you the same answer, which is people kind
01:47of have faith that inflation will go back
01:49down to its 2% level.
01:52There has been some reporting lately on shrinkflation.
01:57And for our viewers, I'll say this is when you pay the same
02:00price for something as yesterday, but get less of it
02:04than before, kind of like my bag of potato chips.
02:09Some have sought to direct attention away from the pain
02:13of runaway inflation that we've experienced and instead blame
02:17producers who themselves face rising cost pressures.
02:22Yet, I haven't seen any mention of shrinkflation
02:26as an inflation cause in any recent monetary policy reports.
02:31Moreover, a Bureau of Labor Statistics article last year
02:36looked at shrinkflation and concluded that, and I quote
02:39again, it has a minuscule impact on overall inflation.
02:43Chair Powell, from the Fed's perspective
02:46and analysis, has shrinkflation been a significant casual
02:51or amplifying factor in the runaway inflation
02:54of the past several years that has imposed maybe greater pain
02:58on American workers and households?
03:00I'd have to say no.
03:03I mean, I would say it this way.
03:04You know, packaging in the U.S. on food products and that kind
03:09of thing, you know, it's going to disclose the contents
03:12of the thing and the price will be what it is
03:14and consumers can make their choice to buy it or not.
03:16But we don't think that's a major driver of inflation, no.
03:21I think from a producer standpoint, it probably is.
03:24If the cost of the item is exponentially higher.
03:31It may reflect costs on the part of the producer.
03:34It probably does.
03:35But that doesn't mean it's a cause of inflation as such.
03:38OK, thank you.
03:39So, switching topics, the Federal Reserve has produced
03:43volumes of research
03:44over the last decade highlighting the negative
03:47consequences of the debit interchange fee cap.
03:51Some of the economists who produced
03:54that research have even worked on this proposed rule, the REG-II.
03:59Chair Powell, was the previous Federal Reserve research
04:03demonstrating Regulation II's detrimental impacts
04:08to low-cost checking accounts flawed
04:11or did it have incorrect conclusions?
04:15And if not, then why would the Fed propose this rulemaking
04:20when all of their research demonstrated detrimental
04:25impacts?
04:26Please.
04:28I am not entirely sure what research you're referring to.
04:31I'll be happy to follow up with you on that.
04:34Yeah, I hope you are because I know we're having this
04:36discussion about the interchange fee caps
04:39and REG-II.
04:42And I'm concerned about going forward on that when much
04:45of the research that we have seen from the Fed
04:50that has been pretty steady over the last number
04:53of years says it has quite detrimental impacts.
04:56So, please, to low-cost checking accounts.
04:59So, if you don't mind, I would love to get some answers on that.
05:02And also, why hasn't the Fed taken into action the higher
05:06fraud costs that debit card issuers will incur as a result
05:11of the new dual routing mandate
05:13for card not present transactions?
05:17I'm over my time.
05:18If you could also answer in writing,
05:21I would be ever so grateful.
05:22I yield back, sir.
05:24Bailey yields back.
05:25And I would like...

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