This was supposed to be the year that US inflation rode the last mile down to 2%, letting the Federal Reserve steadily reduce interest rates from a two-decade high. Now those expectations have been dashed.
Price gains have proven much stickier than anticipated a few months into 2024 amid a resilient economy and labor market. On Tuesday, Fed Chair Jerome Powell said persistent inflation means borrowing costs will stay elevated for longer than previously thought, a shift in tone with ramifications for policy around the world.
A persistent shortage of housing is partly to blame, as are rising commodity prices and car insurance premiums. But some also point to Powell himself for prematurely telegraphing interest-rate cuts, which ignited optimism in financial markets and fueled economic activity.
“They just got the inflation picture wrong,” said Stephen Stanley, chief US economist at Santander US Capital Markets LLC. “The mistake they made was they got really enamored with the combination of really strong growth and benign inflation that we saw in the second half of last year.”
Commodities
After falling for much of last year, energy prices — specifically oil — climbed in the first quarter, and an escalation in the war in the Middle East threatens to push them even higher. The rally has translated to more expensive gasoline. Electricity prices have also climbed.
Shelter, Insurance
Shelter, which accounts for about a third of the CPI, has proved the most stubborn. Despite some timelier measures from the Bureau of Labor Statistics, Zillow Group Inc. and Apartment List that show rent growth for new leases coming down, the corresponding components in the CPI have yet to reflect that.
@ThriftyC0al1tionGreen2wks2W
Corporate greed and price gouging are driving inflation. Until that stops inflation is here to stay.
Don't be naive. We have inflation because the Federal Reserve – our evil Central Bank, controlled by scheming elites – has printed more worthless fiat money. There's a simple solution – abolish the Federal Reserve and return to the Gold Standard.
two clarifying questions: are corporations just now becoming greedy? What percentage of inflation is attributable to corporate greed vs. supply chain shocks and profligate government spending?
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@PolicyHeronPatriot2wks2W
Saying that the rate of inflation is down still means that prices continue to increase. And most people aren't going to recover from 10% inflation by having a couple years where it's "only" 3%.
@CommittedDeerPatriot2wks2W
Prices have gone up at rates not seen in my 15 years of being an adult. Eating out, groceries, homes, rents, cars, etc. The Realtor app shows homes in my city have nearly doubled in market value in the past 5 years, with mortgage rates following.
The majority of people with a brain know the YOY inflation increases aren't as high as the recent peaks, but inflation is increasing above the targeted rate expectations on top of those peaks... With low wage earners demanding more money, the increase in cost to do business is being pushed to the consumer, and purchasing power is diminishing.
@HopefulSmeltRepublican2wks2W
"Inflation went down, yet the average person thinks it went up." I'd love to see some data.
We don't think inflation went up, we think prices went up. They did. About 20% since the start of this particular cycle, in three years or so. Inflation is baked into prices.
It's crazy how being one medical emergency away from financial ruin seems to instill people with a lingering sense of insecurity.
I am convinced food inflation is here to stay. And I believe the primary reason for that is climate change. Yet, one political party leader declares "the science of climate change isn't yet settled" (his words, not mine).
Escalating grocery prices are those we see weekly. Yet virtually no one sees an increase in take-home pay at the same rate (even on a monthly basis). Until we reckon with Mother Nature, we aren't going to see better times. Instead we'll see lower bank balances, warmer temperatures and decreasing crop yields.
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