The U.S. Inflation Reduction Act came into effect a year ago, despite its many provisions. However, at least for now, the effect on reducing inflation is not evident.
On August 16, 2022, U.S. President Joe Biden signed a bill that made several amendments to tax law, allowing Medicare to negotiate drug prices with pharmaceutical companies, providing more funds to the IRS to combat tax evasion and improve customer service, and offering tax incentives for businesses and individuals to switch to green energy from fossil fuels.
Although the act is known as the Inflation Reduction Act, inflation measured by the consumer price index fell from an annual rate of 8.3% to 3.2%. Economists believe that the impact of the act might be relatively minor, with actual changes in inflation more likely influenced by other global economic factors.
Mark Zandi, chief economist at Moody's Analytics, said in an email that the Inflation Reduction Act has had almost no impact on slowing inflation over the past year. The slowdown in inflation is mainly due to the global mask environment's diminishing impact on global supply chains and labor markets, the Russia-Ukraine conflict, and its impact on the prices of oil, food, and other commodities.
Although experts disagree on the exact reasons for the rise in inflation and the subsequent decrease over the following year, many believe that the recovery of supply chains and the Federal Reserve's interest rate policy are the main reasons for the reduction in inflation, rather than Biden's signature legislation.
