NewsUS inflation
Mar 13, 2024 05:00 AM EDT
While inflation continues to be a persistent pain point for the Federal Reserve and President Joe Biden's reelection campaign, both of which are depending on a gradual easing of pricing pressures this year, consumer prices increased once more this month.
Prices increased by 0.4% in February compared to a 0.3% increase in January. The government announced on Tuesday that consumer prices increased 3.2% last month compared to a year earlier, quicker than the 3.1% annual rate in January.
With volatile food and energy prices excluded, so-called "core" prices increased by 0.4% in January and February of the same year, repeating the prior month's gain at a rate greater than the Fed's 2% objective. Since core inflation usually gives a better indication of where inflation is expected to go, it is particularly frequently followed.
Inflation views among voters will undoubtedly play a significant role in this year's presidential contest. Polls reveal that many people blame Biden for the spike in consumer prices that started in 2021, despite a robust employment environment and a record-high stock market. Even with a considerable reduction in inflationary pressures, average prices are still much higher than they were three years ago.
From a high of 9.1% in June 2022, overall inflation has drastically decreased, albeit it is currently decreasing more slowly than it did in the previous spring and summer. Certain products, like as furniture, appliances, and old automobiles, are actually becoming less expensive now that the pandemic's congested supply chains have caused prices to surge.
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On the other hand, costs for dining out, auto maintenance, medical attention, and other services are still growing more quickly than they were before the epidemic. Rising motor maintenance and replacement expenses are reflected in the sharp increase in car insurance rates. Additionally, hospitals are raising charges on patients to cover their increased labor expenses after providing nurses and other in-demand workers with much greater compensation.
Biden outlined cost-cutting measures he has taken in his State of the Union speech last week, including restricting the cost of insulin for Medicare beneficiaries. In addition, the president denounced several big businesses for "price gouging" and "shrinkflation," a practice in which a business reduces the quantity of goods in a package rather than raising the price.
In testimony before Congress last week, Fed Chair Jerome Powell hinted that the bank is coming closer to lowering interest rates. Fed policymakers stated in a statement following their January meeting that they required "greater confidence" that inflation was gradually declining to their goal level of 2%.
Since then, a number of Fed policymakers have expressed their belief that prices will continue to decline. They proposed that one explanation for this trend is that customers are increasingly resisting increased costs by looking for less expensive options.
The first rate decrease by the Fed is still anticipated by most analysts to happen in June, while May is also a possibility. Over time, the Fed lowers borrowing rates for commercial loans, credit cards, mortgages, and auto loans by lowering its benchmark rate.
The economy's continued strength is one element that may maintain high inflation. Despite the fact that most economists had predicted a recession last year, hiring and growth were robust and are still strong. The Federal Reserve's Atlanta office estimates that the economy grew by 2.5% in the previous year and may do so again in the first three months of this year.
S&P 500 futures saw a 0.3% increase following the release, while benchmark stock index futures saw a little increase in their gains.
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