WASHINGTON (AP) – After nearly a year of steady declines, consumer price data to be released Wednesday will show that U.S. inflation remained very high in April, a sign that it may be entering a new, tougher phase. Could
According to a survey of economists by data provider FactSet, consumer prices are forecast to rise 0.4% from March to April, much faster than the 0.1% increase in the previous month.
Compared to a year ago, prices are estimated to have increased by 5% in April, the same year-on-year increase seen in March. If that forecast turns out to be correct, it would be the first time that annual inflation has not declined after nine months of decline.
Costlier petrol, apartment rents and possibly used cars are among the items that could see inflation pick up last month. In contrast, the cost of airline fares and hotel rooms are expected to ease after months of increases.
For more than two years, high inflation has been a significant burden for America’s consumers, a persistent threat to the economy and a frustrating challenge to the Federal Reserve. But now new problems are coming to the fore.
The Fed has raised its key interest rate by a substantial 5 percentage points through March 2022 to try to bring inflation back to its 2% target. In addition to making borrowing more expensive for consumers and businesses, those higher rates have contributed to the collapse of three big banks over the past two months and a possible pullback in bank lending. The result could further weaken the economy.
Even more ominously, the government’s debt limit could be breached as early as June, and Republicans in Congress are refusing to raise the cap unless President Joe Biden and congressional Democrats agree to sharper spending cuts. Would have been If the debt limit is not raised in time, the nation will default on its debt, a scenario that could ignite a global economic crisis.
Inflation has slowed sharply since peaking at an annual rate of 9.1% last June. Still, many economists say the decline so far has been an easy phase. Supply chains that have emptied many grocery shelves and delayed deliveries of furniture, cars and electronics have been resolved. Gas prices fell sharply in the wake of Russia’s invasion of Ukraine, although they rose again in April after OPEC agreed to reduce oil production.
Excluding volatile food and energy costs, so-called core inflation is also expected to remain high last month, with economists forecasting a 0.3% rise from March to April and 5.4% a year earlier.
The Fed and many economists closely monitor core prices, which are considered a better measure of long-term inflation trends. A key driver of core inflation – the cost of apartments and other housing expenses – rose 8.2% in March from the 12 months earlier. Most economists expect apartment rents to rise more slowly in the coming months, helping to slow inflation, as construction of more new apartment buildings is completed.
Chair Jerome Powell and other Fed officials are paying particular attention to the cost of services except energy and housing. They find rising services prices to be particularly sticky because they are heavily impacted by salary increases.
The prices of restaurant meals, airline tickets and hotel rooms have risen steadily as companies have had to raise wages in those industries to find and retain workers. Restaurant prices rose 8.8% in March from a year earlier.
“The most persistent area of inflation is in core services excluding housing, which has been running about 4.5% since last August,” Federal Reserve Bank of New York President John Williams said Tuesday. Williams, who is close to Powell, is an influential voice in Fed policy.
“It is driven by a continuing imbalance in overall supply and demand, and will take the longest to bring down,” Williams said.
When they met last week, Fed policymakers agreed to raise their benchmark rate by a quarter point, the 10th straight increase, to about 5.1% — the highest level in 16 years. The Fed’s rate hikes, aimed at reducing spending, growth and inflation, have led to higher costs for mortgages, auto loans and credit cards, and business borrowing.
Most economists believe that raising rates over time will have its intended effect. Yet most also worry that the hike will weaken the economy so much that it will slide into recession sometime this year.
At last week’s meeting, the Fed indicated that it may hold off on raising its rates for now and take time to monitor the effects of its policy actions on the economy, which could take several more months to become fully clear. Are.
Christopher Ragber, The Associated Press