Decelerating Inflation Still Takes a Toll
Signs of Relief
For most of this year, inflation has been on a tear. Supply-chain constraints, the Russia-Ukraine war, and robust employment have all put winds in the sails of rising prices. Some key non-discretionary expenses such as food and energy, including gas and utilities, moved up to dizzying levels.
In response, the Federal Reserve has been pumping the brakes on the economy since March through a series of rate hikes. Last month, the Bureau of Labor Statistics inflation report indicated some moderation of price increases. It seems the Fed’s actions are beginning to have an effect.
Prices Still Elevated
While prices in many categories are undeniably high compared to this time last year, there are areas where optimism may be warranted. Oil, which in March soared to $120 a barrel, has since come down by about 25%. However, while Americans may appreciate lower prices at the pump, a tank of gas still costs about 44% more than it did a year ago.
There is also evidence that the housing market is beginning to soften. Home sales are declining and prices recently fell slightly. Market observers also see signs that supply chain dynamics are starting to improve. This could lead to less scarcity of products and price relief across a series of products.
Fed Has More Work to Do
Still, while prices may be increasing in some areas at a slower pace, Americans’ overall cost of living is way up from the pre-pandemic period. Many are attempting to recalibrate to the new economic reality by adjusting their spending habits and priorities.
Seasonally-adjusted inflation came in flat for July, but it was still percolating at 8.5% for the trailing 12 months. This is way above the Fed’s 2% target, which means the tricky process of trying to cool off the economy is ongoing. In the meantime, Americans will be re-shuffling their budgets as they await more good news.
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Published at Mon, 22 Aug 2022 07:00:12 -0500
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By Sykkel og mobilitet on 2021-11-02 10:38:40