Price increases slowed across the US in April, but the annual rate of inflation remained near a 40-year high, leaving many Americans struggling to meet necessities such as food, housing and fuel.
The latest figures from the consumer price index (CPI), which measures a wide range of goods and services, showed that prices increased at a monthly rate of 0.3% in April, compared to 1.2% in March, the first drop since August 2021.
But it is still too early to say whether inflation has peaked. At 8.3%, the annual rate of inflation in April was lower than March’s 8.5%, but remains at a level not seen since the 1980s. Throughout the year, the CPI food index it rose 9.4%, the biggest 12-month increase since April 1981. The so-called core price index, which excludes volatile food and energy categories, rose 0.6% in the month, compared to March. 0.3% gain.
The figures come as the Federal Reserve is moving to sharply raise interest rates in a bid to bring prices back under control. The pace of rate hikes and fears they could trigger a recession have spooked investors and sent stock markets reeling.
The increase in demand and the lack of supply thanks to the pandemic have caused price increases in a wide range of goods and services. Airfares have increased 40% in the last three months. A booming housing market has made housing unaffordable for many Americans, especially people of color, with 49% of people recently telling Pew Research that affordable housing is a big problem in your community.
Randall Kroszner, a University of Chicago economics professor and former Fed governor, said a sharp rise in core inflation would worry the Fed. “That’s where you look for evidence that inflation is taking hold,” he said.
Kroszner said that global problems, including the war in Ukraine and the covid problems in China, have combined with rising rates to deliver a “double whammy” to the US economy. He believes that the chances of the US slipping into recession have increased and that the housing and labor markets may be the next to suffer.
“Usually I’m optimistic, but this is a challenge,” he said.
The rising cost of living has become a major political issue as the US prepares for the midterm elections in November. The price hike has hit Joe Biden’s approval ratings. this week a Investors Business Daily/TIPP The poll found that Biden’s approval had fallen to 39%, approaching his previous record low of 38% set in February, and confidence in the US economy was close to a minimum of eight years.
On Tuesday, Biden said his administration was doing everything it could to tackle inflation. “I want all Americans to know that I am taking inflation very seriously,” he said in remarks from the White House. “It is my top national priority.
The Biden administration has tried to lower prices. In March, the White House announced plans to release up to 1 million barrels of oil a day from the strategic reserve, in an attempt to cushion high gasoline prices exacerbated by the war in Ukraine. But gas prices remain high at a national average of $4.37 a gallon compared with $2.96 a year ago. according to AAA.
Republicans have blamed Biden’s stimulus programs for rising prices, a claim he denies. The president said his policies had “helped not hurt” the nation’s economic prospects.
MIT economics professor Kristin Forbes said the US recovery had shown that the US economy lacked skilled workers in industries where job demand was high, driving up wages, a problem that also affected to the UK in the wake of the pandemic.
The former Bank of England policymaker told a committee of MPs in the UK parliament that she expected inflation in the US to fall, especially once increases in borrowing costs translate into mortgages. and more expensive loans.
However, he said the UK was facing a sharp inflationary spiral that would continue into the autumn because Britain was the only country affected by all six engines of global inflation. Inflation stands at 7% in the UK, but the Bank expects it to exceed 10% by the end of this year.
He highlighted the impact on the UK of higher energy prices, falling exchange rates, trade restrictions that pushed up goods prices, a decade of modest inflation before the pandemic, expectations among businesses and consumers of much higher inflation a year from now and a tight labor market, forcing up wages.
“The UK is the only country that ticks every box with inflationary pressures coming from all six areas,” he said.
Reference-www.theguardian.com