US Inflation Drops But Still At A 40 Year High

US Inflation Drops But Still At A 40 Year High

Inflation may have slowed somewhat in April from a 40-year high, the first deceleration after seven months of rising price hikes, following a year of skyrocketing prices for petrol, food, and other basics.

According to a survey of analysts conducted by data provider FactSet, the government is anticipated to disclose on Wednesday that consumer prices rose 8.1% last month compared to a year ago. That would be a drop from March’s 8.5% year-over-year increase, which was the biggest of the year.

If the expected decline in yearly inflation continues, it will confirm the signal of consumer inflation approaching its end. Monthly price rises are also slowing, as are certain other inflation indicators. Nonetheless, the April rate would be the second-highest in four decades, putting a strain on families, particularly those with lower incomes. And it would only be the first step on a long and laborious path back to the Fed’s goal inflation rate of 2%. Many analysts predict yearly price hikes of 5% to 6% by the end of the year, a historically high level that will likely outpace average wage growth. 

Jose Torres, senior economist at Interactive Brokers said, “It’s too early to declare victory, it’s not going to get any worse, but it’s still at an uncomfortably high level.”  

Inflation is posing a serious political problem for President Joe Biden and congressional Democrats in the midterm election season, with Republicans claiming that Biden’s USD 1.9 trillion economic stimulus package, which included stimulus checks, enhanced unemployment aid, and child tax credit payments, overheated the economy. Biden tried to take the initiative Tuesday and declared inflation “the No. 1 problem facing families today” and “my top domestic priority.”

While food and energy prices have risen at some of the highest rates in the previous year, experts look to the core statistic to gain a sense of underlying inflation. Core inflation tends to climb more slowly than total price increases, and it can also take longer to fall. 

The Fed has begun what might be the quickest run of interest rate rises in 33 years due to the unexpected continuation of high inflation. The Federal Reserve hiked its short-term interest rate by a half-point last week, the largest rise in two decades. Powell also hinted that additional rate rises of this magnitude are on the way.

The April employment report contained statistics on hourly pay that showed wage growth was slowing, which, if it continues, might assist to moderate inflation this year.

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