The Indicator from Planet Money - Are we in a new era of permanently higher prices?

Episode Date: June 18, 2026

Inflation is at a three-year high. That’s a problem for the Fed. Yet, under the leadership of new chair Kevin Warsh, it opted yesterday not to hike interest rates. So today on the show, who are the winners and who are the losers amidst higher inflation? Mark Blyth’s book, co-authored with Nicolò Fraccaroli is Inflation: A Guide for Users and Losers. Fact checking by Sierra Juarez. Your Next Listen — Why big banks aren’t interested in your savings account Connect with The Indicator — Sign up for The Indicator’s brand new newsletter — Buy the Planet Money book — Find our socials, YouTube and more!— For sponsor-free episodes, subscribe to NPR+ See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. Yesterday, the Federal Reserve announced that it was keeping interest rates on hold. The central bank wasn't taking any strong action this time round to combat rising prices, even though inflation is high at 4.2%. All of this makes persistent inflation more likely. The new Fed chair, Kevin Warsh, claims he's going to shake things up. He set up several task forces to help him do that. But here he is at yesterday's press conference on his most immediate.

immediate focus. This committee will deliver price stability. Kevin Ward said that the Fed he came into hadn't achieved that. We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2%. That's been going on for more than five years. And given that the Fed didn't raise interest rates yesterday, could we be bracing ourselves for another inflationary wave?

This is the indicator from Planet Money. And Derryam Woods. And I'm Whalen Wong. Today on the show, inflation, winners and losers. We ask whether we could be entering a new world of high inflation. And we talk about who's going to benefit and who's going to hurt. Mark Blythe is a political economist at Brown University. He's the co-author of Inflation, a guide for users and losers.

And being from Scotland originally, Mark had some comments to make about my name. The Darien Project is what bankrupted Scotland. led to the Arts of Union. However you know, it's spelled slightly differently. But yes, it is a slightly embarrassing. I have to say for an American, I'm just like, what's all this? I do not have that kind of association with your name. So the Darien scheme was a Scottish attempt to colonize modern-day Panama.

It was abandoned fairly quickly in 1700. But anyway, the economic shocks that we wanted to talk about were closer to the present day. Yes. We wanted to know whether high inflation could be, the new normal. I firmly fall into the we're in the higher for longer, if not permanently camp. Permanently camp? No thanks. Yeah. So Mark backs up that somewhat bleak prognosis

by saying that the last 30 years were unusual. Combination of China and Eastern Europe joining the global workforce pushing down wages and pushing down prices. A flood of goods coming out of China and post-Soviet countries meant prices for phones and cars and fridges just got cheaper and cheaper. Also, basically since President Gerald Ford in the 1970s, it's been the norm for presidents to back away from pressuring the Federal Reserve that's contributed to low inflation. But that norm obviously ended with President Trump.

And ultimately because of the container ship, the IT revolution, globalization, all of which we're pushing down on prices. And all of those things are either going into reverse or coming to an end. So I think it's kind of inevitable. Add climate change into this as a series of supply shock. that are probably going to get more prominent, and you have all the ingredients you need for sustained higher inflation rates. So if we are in an era where the value of our money just crumbles each year,

Mark says this doesn't hit us all equally. The story we like to tell each other that we all suffer from inflation simply isn't true. Because it varies across the income distribution. I like to say to people, if you shop at Whole Foods, you're impervious to inflation because you've been paying 30% more for your groceries than you ever should. have. Yeah, a bit of fat in their spending they could cut down on. Definitely, right. Now, if you're shopping, if you're a single mom juggling two jobs and you're shopping at Dollar General and prices

go up by 5%, you've got to make some serious choices. So yes, the Whole Food Shopper might need to start going to Dollar General or the low-cost supermarket Aldi. But relatively speaking, they're not as worse off as the low-income shopper. So that's the broad picture. If you have more money, you can afford to make more choices. But going into specifics, one winner from an inflationary shock, Mark says, is someone who has a large mortgage on a low fixed interest rate, because as inflation gets higher, the value of that mortgage decreases. Inflation is generally good for borrowers with existing loans.

That's why all the boomers have huge houses. He says that's basically because many of them got a fixed rate mortgage before the high inflation of the 1970s. Mark says another winner is someone who has their savings in the stock market. That's because in Mark's view, a lot of companies can quickly jack up their prices in an inflationary shock, and that raises those share prices. Take oil companies. Oil companies made a tremendous windfall over the past couple of years.

And this is what you'd expect for American oil companies. If Russia or Middle Eastern producers are blocked from exporting their oil, then that we those competitors. So American oil companies can profit from prices increasing. To Mark, the calls that executives make what their shareholders are revealing, especially after the pandemic and Ukraine's supply chain shocks. One of the things that we heard on earnings calls through the recent inflation was the spokesman for these corporations getting on the call to their investors and saying, oh, we're able to push on through prices in this period. This is great for our profits.

So, you know, you could say on the one hand, they're just talking. in their book to their investors. In the other hand, well, it's good camouflage for making abnormal profits. Yeah, so this was a very controversial point in the economics discipline was how much was corporate greed responsible for inflation?

Right. So sometimes the counter arguments were precisely that, that this was talking to investors, that, you know, profit margins, if you look across different industries, weren't actually that correlated with inflation. What's your response to the critics?

I think the critics are absolutely right. You can't start. inflationary period just with corporations doing this. Markets are reasonably efficient if one of them tries to raise prices, the other one could eat their lunch. But when you get concentrated markets, when you have inflationary shocks, why wouldn't a firm try and take advantage of that? A contrary take is that actually monopolies can more easily avoid passing on higher prices

to consumers. They have greater profits that they can choose to eat into. Whereas a super competitive company operating on tiny margins kind of has to raise prices. or go out of business. But what is definitely true is that some products are easier for companies to raise prices on than others. Those products, as every Economics 101 class teachers, are facing inelastic demand. And if you're at the top of the income distribution and you have a corporation with a critical inelastic demand thing that it sells, you can make a lot of money out of this.

Mark believes that corporations making a lot of money from inflation includes banks. So I'm guessing that you have a savings account somewhere. Could you tell me what the interest rate on your savings account is? Basically nothing. Probably negative when you account for inflation. So when interest rates went up, the banks basically are able to charge more. They have a higher interest rate. But they didn't pass that through the savers.

So you're still getting like the square root of nothing in your savings account and now they're charged 6%, 7% on their mortgages. Now, this idea that banks will profit from the Fed raising interest rates isn't a fundamental law of nature. In the old days, when the Fed jacked up interest rates to fight inflation, banks also had to pay more to people with money and savings accounts. But in the 2008 Great Recession, the Federal Reserve responded by offering banks easily accessible loans that flooded banks with money, so they haven't needed to entice people to save with higher interest rates. And as for the losers from inflation, Mark says it essentially.

In short hand, I just say the bottom 80%. The bottom 80% of the income distribution. And really the bottom 40% are the ones that really, really suffer this because they don't have much in the way that they can augment their incomes. And if you're already juggling two jobs that are like low pay, then you're in real trouble. The top 20%, they're inflation protected. Everyone else isn't. I can go from Whole Foods to Aldi. Somebody who's going from Oldie, they don't have a lot of places to go. Yep. Somebody who can afford to shop at Whole Foods, I can assure you that I'm, I shopper Aldi all the time. Yeah, it's got some great prices. I got to say. Another Aldi shopper here.

It's an inflation-free zone, it seems. You know what I've been doing? My local Albertson's chain has an app where you can look at prices. So before I go grocery shopping, I look up the price for every single item on my list, and I note down the unit cost. And then I take my app to Aldi, and for every item, I look up the price at Oldie. and compare it to see who's cheaper. And now grocery shopping takes me five hours.

But I'm saving at least some dollars, I think. In a world of high inflation, I know who I'm going to be asking for advice. Yeah. This episode was produced by Cooper Katzma Kim and engineered by Jimmy Keely. It was fact-aged by Sierra Juarez. Cake and Cannon is our editor and The Indicator is a production of NPR.