0.25% or 0.33%? Democrats’ Inflation Reduction Act wouldn’t lower prices by all that much, analysts say

The reviews are coming in for Senate Democrats’ Inflation Reduction Act of 2022, and some analysts are suggesting the $739 billion healthcare, energy and tax package won’t actually reduce inflation by a great deal.

“We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024. We estimate a 0.25 percentage point fall in the PCE price index by the late 2020s,” said Penn Wharton Budget Model analysts in a report, referring to the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index.

“These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.”

In a similar vein, Moody’s analysts said in a report that the legislation, unveiled last week by Sen. Joe Manchin of West Virginia and Senate Majority Leader Chuck Schumer will “modestly reduce inflation over the 10-year budget horizon.”