Economists from JPMorgan Chase said the Inflation Reduction Act, which President Joe Biden recently signed into law, will have “almost no effect” on price growth that’s currently running at the fastest pace in four decades.
The tax, climate and healthcare bill, which passed both chambers of Congress and was signed into law by Biden in a span of less than two weeks, was designed to implement a scaled-down version of president’s domestic policy agenda following negotiations with moderate Democrats, Sens. Joe Manchin (D-W.Va.) and Kirsten Sinema (D-Ariz.).
The nonpartisan Congressional Budget Office, the Committee for a Responsible Federal Budget and the University of Pennsylvania Wharton Budget Model all found that the legislation will have a minimal influence on inflation, which climbed an annual 9.1 percent in June.
JPMorgan economists agreed with these analyses.
“The aggregate demand impulse is trivial,” Michael Feroli, JPMorgan’s chief U.S. economist, wrote in a note. “Moreover, we believe the drug-pricing provisions will have little near-term impact on the [Consumer Price Index],” he said.
The Consumer Price Index report for July showed a modest dip in year-over-year inflation, with inflation climbing to 8.5 percent – down from 9.1 percent in June.
The law is estimated to reduce the federal budget deficit by about $300 billion over the next decade.
“By itself, this very modest reduction in the fiscal impetus to aggregate demand implies almost no change to the near-term growth outlook,” Feroli said.