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No matter how hard you look, the latest inflation report has no silver linings, said Ruth Carson and Ishika Mookerjee in Bloomberg: Dashing hopes that prices would start to moderate, the new data show they are still soaring. The S&P 500 officially fell into a bear market this week — down 22 percent from its latest high — after the U.S. Bureau of Labor Statistics found that “faster-than-forecast U.S. inflation continued gathering pace” in May. The Consumer Price Index rose last month by 8.6 percent from a year earlier, its highest level since 1981. The numbers snuffed out expectations that the Fed can orchestrate a recession-free “soft landing.” Traders began bracing for the Fed to hit the brakes by “jacking up borrowing costs” faster than it has at any time since the mid-1990s. 

So much for “peak inflation,” said The Wall Street Journal in an editorial. Prices rose across the board last month. Gasoline is now averaging $5 per gallon nationwide, while “everything at the supermarket has become more expensive in the past year.” At the same time, real average hourly earnings fell 3 percent compared with May 2021 as wages struggle to keep pace with prices. All that “progressive spending given to Americans in welfare and new entitlements” has been “taken away in a lower standard of living.” Just imagine how bad things would be if West Virginia Sen. Joe Manchin hadn’t stopped Democrats from passing that $4.5 trillion Build Back Better plan. The actual numbers are ugly enough, said Kevin Dugan in New York magazine. “The report has effectively shattered the cautious optimism that the economy could actually turn in any meaningful way anytime soon.” Worse, they show that the Fed’s actions have been “ineffective so far in the face of today’s inflationary pressures.”

Policymakers were wrong about inflation being “transitory,” and they are admitting as much, said James Surowiecki in The Atlantic. But how bad were their mistakes? Though it now “seems inarguable” that the stimulus package was too big, it did help millions of people get “back to work much faster than they would have otherwise.” The Biden administration opted to “err on the side of going big” with economic aid to preempt a post-2008-style period of stagnant growth and high unemployment. Both the White House and the Fed “applied the last playbook to the new crisis,” said Nick Timiraos and Jon Hilsenrath in The Wall Street Journal. They saw the danger of doing too little to stimulate the economy, and missed the danger of doing too much. “We fought the last war,” said one of President Obama’s top economic advisers.

Actually, the Federal Reserve has been fighting that last war for years, said Christopher Leonard in The New York Times. That set up the conditions for the current spiral. Starting in 2010, by holding interest rates near zero while pumping trillions into the banking system, the Fed “embarked on an unprecedented and experimental path” that formed the fault lines for a “financial earthquake.” The stock market’s deterioration now represents the “sobering realization on Wall Street” that the “decade of supereasy money” that supercharged stock prices is over.

This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.