This newsletter might have to be paid for at the rate of inflation.
As a measure of inflation, the consumer price index, which is used by the US government, jumped 7.5 percent for its fastest year-over-year growth in 40 years. Inflation also didn’t seem to be slowing down. It rose 0.6 percent each month, the same rate as in December. Both of the readings came in higher than the forecasts, which was good news.
That thing that’s going up in price Everything.
Energy, goods related to cars, and services linked to the pandemic (airfares, event admissions) made up about half of the price rises in January.
The other half? Food prices rose at their fastest rate since 1981, clothing prices rose by 5.3%, and, as anyone who has looked at Zillow knows, housing prices rose by 4.4%.
This rate of inflation is very unpleasant.
Over the last year, many Americans have seen their pay rise a lot. Wage gains in January (5.7 percent) came in far below the rate of inflation, so rising costs have hit people’s wallets in the wrong way. According to a Moody’s report, the average US household is spending an extra $276 a month because of rising prices.
What can I do? The strategy of waiting for supply chain bottlenecks to be fixed isn’t working, and many economists say that taking action now is the best way to move forward (if not way past due).
When it comes to pandemic-era stimulus programmes, the Federal Reserve seems to have heard the message. It’s quickly winding down these programmes, and it plans to start raising interest rates next month in an effort to keep prices from rising.
People now want to know how many rate hikes there will be and how quickly they will happen.
Thank you for the best of luck to Jerome Powell, who is the head of the Fed. He’ll have to do a very difficult job to bring prices down to a more normal level without putting a damper on a growing economy. Paul Volcker, the head of the Fed in the early 1980s, raised interest rates at the time, which slowed inflation but also caused the economy to go into a slump.