However, the President Joe Biden’sPositive comments about what appear to be early indicators of an inflation peak, used car prices continue rising at levels never seen before the Covid-19 pandemic.

Biden’s administration blamed a lot of rising inflation rates on the nation’s used car market. However, the White House admits that it cannot do much to lower the current rates.

The inflation contribution of used cars has been zero over the last 20 years. The U.S. Bureau of Labor Statistics data shows that it is now higher than 1% annually.

Consumer prices for services and goods increased 0.5% in December while prices for used cars rose 3.5%. According to the Labor Department, used car prices contributed 0.12 percentage point to the overall increase of 0.5% based on weighted calculations of this price change and Americans’ demand.

Historical highs in inflation are also being experienced by the price of used vehicles. according to White House economic advisor Jared Bernstein.Bernstein sits on Biden’s Council of Economic Advisers and wrote that he considers the impact of used cars on headline inflation “remarkable, and revealing.”

“It’s a reminder how extreme this current inflation seems,” he said. The world still knows how to make new cars (and used ones) and it is reasonable to expect that this trend will reverse once there are less supply constraints.

Bernstein shared the same view as most economists when he stated that the main supply-chain problem responsible for used car inflation and the impact it has on consumer price index data was a shortage semiconductors.

Economists believe that the Covid-19 Pandemic caused the huge backlog. It decimated many factories worldwide and disrupted the shipping routes in the last two years. According to Cox Automotive, the main reason for the 25% increase in used cars prices by 2021 is believed to be logistical issues.

The pandemic impacted consumers’ desire for cars, causing hundreds of thousands to postpone or cancel their 2020 travel plans. This one-time cancellation caused unprecedented car demand in spring 2021. The pandemic was cured by vaccines, and the public health rules were relaxed to allow entire communities to book vacations.

It’s not enough. “It’s not satisfied demand,” Charlie Chesbrough (senior economist, senior director of Industry Insights at Cox Automotive), stated to CNBC. The U.S. market will continue to do very strong sales until the new market is able to rebuild demand and ensure that enough product is available for everyone.

Simply stated: You can’t buy used cars if you don’t own new ones.

Cox Automotive has reported that in December, the average retail price per used vehicle hit a new high of $28,000.

Chesbrough claimed that there was no reason to anticipate a price decrease in the market for used vehicles anytime soon.

In recent months the president’s approval ratings has been declining. Many voters surveyed told CNBC/Change Research that they are worried about how the Biden administration handles the economy. 60% of 1,895 survey respondents disapproved of Biden’s economic handling, which is a 6-percentage point decline in satisfaction since September.

The White House has made every effort to assure Americans it is working to reduce the cost of the increase.

Bernstein tweeted that there are measures being pursued by the White House to help reduce car prices in the long term. U.S. Senate Bill pending In June, the Senate passed the Innovation and Competition Act. It would inject billions in chip production domestically as Washington tries to limit China’s influence in the field.

Potential upsides for the Biden government include the possibility of a moderated inflation and a Federal Reserve that will raise interest rates in the coming year.

Cox Automotive anticipates that used-vehicle pricing will continue to rise in spring. However, Cox Automotive expects that inflation will end in the second quarter of this year and that a more regular pattern of depreciation will return.

Bank of America economist Alex Lin told CNBC last month that in used car prices — and overall inflation — face some fierce year-over-year comparisons starting in the spring. If sellers raise used car prices by a similar percentage in 2021, then they will have to do so again this year to maintain inflation at its current levels.

Lin said that it was quite unlikely.

Lin stated in December that wholesale prices have risen more than 60% since the pandemic. The question now is, “Will we see an additional 60% next year?”

“I mean I hope so,” he said. But I think I’d be skeptical about this as a base case.”