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US Inflation Slows To 6.4%

By 02/14/2023 7:23 PMNo CommentsBy YidInfo Staff

The latest indication that the high inflation that has gripped Americans for over two years is gradually lessening was the pace of consumer price rises slowing down again in January compared to a year earlier.

However, the government’s consumer price data released on Tuesday revealed that inflationary forces in the American economy are still strong and are likely to keep prices high well into this year.

The Federal Reserve will continue to face pressure from rising prices to raise its benchmark interest rate even higher and maintain it there until the end of the year.

After increasing by 6.5% in December, consumer prices increased by 6.4% in January.

It was significantly behind the peak of 9.1% in June and the seventh consecutive year-over-year decrease. The Federal Reserve’s 2% annual inflation objective is still way above.

Additionally, consumer prices rose by 0.5% monthly from December to January, a significant increase over the 0.1% increase from November to December. The cost of clothing, food, and gas increased last month.

The findings indicate that although inflation declines, it will probably do so gradually and unevenly. In January’s inflation report, the government also included annual adjustments to its methodology, which led to higher-than-expected monthly increases in the last three months of last year.

The decline in inflation after the fall is more gradual than a few weeks ago when combined with January’s pricing numbers.

So-called “core” prices, which exclude variable costs for food and energy, rose by 0.4% in January, up from 0.3% in December.

Core price growth from a year ago was 5.6%, barely 0.1% less than in December, when it was 5.7%.

Core prices have increased at a 4.6% annual pace over the last three months, which is less than the amount from a year ago and indicates that further drops are to come. However, that is an increase from 4.3% in December.

An asset management company PIMCO economist observed, “These things seldom happen in a straight line.” “However, I believe that the weight of the evidence implies that inflation is beginning to trend in the right direction.”

According to Fed Chair Jerome Powell, the “process of getting inflation down has begun.”

But he added, “This procedure is likely to take quite some time.” “We don’t anticipate it will be smooth; we anticipate it will be rough.”

To rein in inflation that is out of control, the Fed has aggressively hiked its benchmark interest rate during the past year to its highest level in fifteen years.

The Fed wants to reduce borrowing and spending, slow hiring, and relieve pressure on firms to raise salaries to attract or retain employees.

Increased labor costs are often passed on to customers as increased pricing contributes to inflation.

Until now, the majority of the reduction in inflation has been caused by more fluid supply chains and earlier drops in gas prices.

These elements have significantly lowered the inflation rate for toys, cars, and furniture. After falling for three months, the cost of core products increased by 0.1% in January.

For the second consecutive month, furniture costs remained steady in January and are only 2.2% higher than they were a year ago. Although they were still 5.8% higher than in January last year, average new car costs only increased by 0.2% last month.

Used automobile prices fell 1.9% last month, marking the seventh straight month of declines after surging in 2021 and early last year due to significant supply bottlenecks. Compared to a year ago, they are currently 11.9% lower.

According to the EIA, gas prices increased 2.4% in January, with national average prices at $3.50 per gallon by the end of the previous month. As of Tuesday, AAA reported a return to $3.41 gas prices at the pump.

The increase in food costs from December to January was 0.5%, contrary to expectations for a lesser rise. Bread and cereal goods increased in price.

In addition, the cost of eggs increased by 8.5% in January alone and by a staggering 70% over the previous year. Feed costs have increased, and the avian flu pandemic has decimated flocks of chickens.

Pat DeCandia, a retired teacher from Ridgefield, New Jersey, has changed her purchasing patterns due to higher food prices and rising costs. She will no longer purchase specialty items like smoked salmon at Costco.

I don’t need that, she said.

DeCandia is purchasing more store-brand goods because they are usually less expensive.

She no longer purchases Hellmann’s mayonnaise; instead, she now purchases Bowl & Basket, a store-label brand at ShopRite. And she buys in bulk anytime something is on sale.

Although commodities have decreased throughout the economy, housing costs are still unacceptably high. Rental prices are now 8.6% higher than they were a year ago after rising by 0.7% in January.

According to studies by AllianceBernstein economist Eric Winograd, housing expenses account for 2.75 percentage points of the 6.4% yearly inflation increase.

Powell and other economists, however, predict that by the middle of this year, housing costs will begin to decline.

Since the fall, market rates for brand-new leases have been declining, and the Fed anticipates that these reduced prices will gradually be reflected in official data.

But aside from housing, prices for other services continue to rise. Prices for auto insurance increased 1.4% in January and are now almost 15% more than they were a year ago.

Movie tickets and veterinarian expenses are included in the recreation category, which increased 0.7% last month and 5.8% year over year.

The cost of services, excluding housing, is exciting to the Fed. This is because it can be particularly challenging to control the costs of labor-intensive services.

Employers frequently pass on these higher labor expenses to their customers by raising prices due to the tight labor market, which forces them to increase wages to recruit and retain workers.



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