Washington (AP) – After nearly a year of steady declineWednesday’s consumer price data likely show that US inflation will remain stubbornly high in April, entering a newer, more sticky phase. It shows that it is possible.
Consumer prices are forecast to rise 0.4% from March to April, much faster than the previous month’s 0.1% rise, according to a survey of economists by data provider FactSet.
Compared to the previous year, prices in April are expected to rise by 5% year-on-year, the same as in March. If this forecast proves accurate, it would be the first time annual inflation has not fallen after his nine months of decline.
Items that may have fueled inflation last month include higher gas prices, apartment rents and the possibility of used cars. By contrast, airfare and hotel room costs are expected to moderate after months of rising.
For more than two years, high inflation has been a major burden on US consumers, a continuing threat to the economy, and a frustrating challenge for the Federal Reserve. But now a new problem has emerged.
The Federal Reserve has raised key interest rates by a significant 5% from March 2022 onwards. This is to try to bring inflation down to the 2% target. Not only is it much more costly to borrow for consumers and businesses, but rising interest rates have caused three of his biggest banks to fail over the past two months. And bank lending may recede. As a result, the economy could become even weaker.
Even more ominously, the government debt ceiling could be breached by early Juneand Republicans in Congress are refusing to raise the ceiling unless President Joe Biden and Democrats in Congress agree to significant spending cuts. A scenario that could lead to default and ignite a global economic crisis.
Inflation has slowed sharply since peaking at 9.1% annualized last June. Still, many economists say the decline so far has probably been an easy phase. The supply he chain problem that was stripping many grocery shelves and delaying deliveries of furniture, cars and electronics has been resolved. Gas prices also fell steadily after skyrocketing in the wake of Russia’s invasion of Ukraine, but he rose again in April as OPEC agreed to cut production.
Barring volatile food and energy costs, so-called core inflation is also expected to remain high last month, with economists expecting it to rise 0.3% in March-April and 5.4% year-on-year.
The Fed and many economists closely monitor core prices, which are seen as a better measure of long-term inflation trends. The cost of apartments and other housing costs, one of the main drivers of core inflation, surged 8.2% in March from his 12 months earlier. Most economists expect apartment rents to rise much more slowly in the coming months, with inflation slowing as new apartments are completed.
Chairman Jerome Powell and other Fed officials pay particular attention to the cost of services, excluding energy and housing. They think service price increases are particularly tenacious as they are largely supported by rising wages.
Prices for restaurant meals, airline tickets and hotel rooms have risen steadily, forcing businesses to raise wages to find and retain workers in these industries. An 8.8% jump from the previous year.
New York Federal Reserve Bank President John Williams said the sector with the most persistent inflation is core services, excluding housing, which has risen about 4.5% since last August. Williams, who is close to Powell, is an influential voice in Fed policy.
“This is due to the overall imbalance between supply and demand, which will take the longest to resolve,” Williams said.
Fed policymakers agreed to raise benchmark rates when they met last week This was the 10th consecutive year of a one-quarter percentage point increase to about 5.1%, the highest level in 16 years. The Fed’s rate hikes, aimed at containing spending, growth and inflation, have led to higher costs for mortgages, auto loans, credit cards and corporate borrowing.
Most economists believe that rate hikes will have the intended effect over time. However, most people are concerned that rate hikes will weaken the economy and plunge it into recession later this year.
At its meeting last week, the Fed hinted it might pause rate hikes and take time to monitor the impact of policy actions on the economy, but it will take several more before full clarity. can take months
