WASHINGTON: According to federal figures released Tuesday, Americans spent more for fuel, food, and other necessities last month, despite an ongoing wave of record inflation exacerbated by Russia's invasion of Ukraine.
The consumer price index (CPI) increased by 8.5 percent in the year ending in March, the highest increase since December 1981 and a reminder of the strain on President Joe Biden's government as it seeks new methods to penalise Moscow for its attack on its neighbour.
The rise in inflation has dragged Biden's support ratings down since last year, and the president has tried to blame it on Russian President Vladimir Putin and the disruptions to global oil markets caused by the invasion.
"Putin's price surge in gasoline accounted for 70% of the increase in prices in March," Biden claimed during a speech in Iowa, despite the Labor Department said it was closer to half.
As the economy recovered from the Covid-19 outbreak last year, prices continued to rise, and while the latest data showed expenses reaching record highs for numerous commodities, it also revealed hints that the rise may be levelling down.
Prices grew 1.2 percent in March, matching analyst expectations, but "core" prices, which exclude volatile food and energy sectors, rose 0.3 percent, less than predicted.
"Higher energy, food, and commodity costs, which are turbo powered by a worsening in supply chain problems, have added extra fire to the scorching rate of inflation," said Kathy Bostjancic of Oxford Economics.
The continued price increases have boosted the case that the Federal Reserve would take dramatic action at its policy meeting next month, boosting the benchmark lending rate by half a percentage point rather than the quarter-point hike last month.
"With labour shortages driving employers to boost pay, we are in the midst of a wage-price inflation cycle that will necessitate extraordinary Fed action to clear the economy of the spreading inflation threat," said Joel Naroff, an economist.
Businesses' problems to locate enough personnel and supplies, the Fed's low interest rate policies, and congressionally approved stimulus packages all contributed to the rise in inflation.
In response, the White House has rushed to provide relief, including releasing strategic oil supplies to cut gas prices and lifting a ban on selling a lower-cost gasoline blend during the summer months, which Biden promoted on his visit to Iowa. The Fed, on the other hand, is the most powerful anti-inflation force in Washington.
Despite the fact that rate hikes are projected to cut prices in the coming months, central bank Governor Lael Brainard said Tuesday that the aftermath of the Ukraine crisis "certainly skews risks to the upside in inflation."
In a conversation following the data's release, Brainard stated that a new pandemic lockdown in China "has the potential to prolong out some of those constraints that we've seen in supply chains."
According to Labor Department data, Americans are in serious financial trouble when it comes to purchasing must-have things.
Prices for accommodation, which includes rents, increased by 0.5 percent, while food prices increased by 1% overall.
According to the report, grocery prices increased by 1.5 percent in the month and by 10% over the previous year, the highest increase since March 1981.
However, used car costs, which were among the first to rise last year, fell by 3.8 percent last month, lowering core CPI. After seeing monthly hikes of more than 1% in the latter months of 2021, new automobile prices only increased by 0.2 percent.
However, given how high prices have grown in other categories, Naroff believes some members of the Fed's policy-setting committee may argue for a 0.75-point rate hike next month, which would not necessarily bring prices down swiftly.
0 Comments