The Fed in a Tight Spot: Inflation Declining in the US

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the rise in US consumer prices slowed down slight in February but still indicates a high level of Inflation that arises a challenge for The Federal Reserve (Fed) is at a delicate moment for the financial system.

the government He said Tuesday that prices rose 0.4%. last Month, just below 0.5% in January rise. However, excluding volatile food and energy prices, so-called core prices rose 0.5%. in February, just above January’s 0.4% gain. The Fed pays special attention to the fundamental measure as a benchmark of underlying inflation pressures.

Despite the prices rising Much faster than the Fed would like, some central economists predict bank to suspend it year- Long line of interest rate rises when met next week.

with collapse of Two big banks since Friday have been raising concerns about other regional banks, the Federal Reserve, for Now, you may focus more on Confidence boost in the financial system from on he is tall-term drive to tame inflation.

This is a sharp turnaround from just A week ago, when Chairman Jerome Powell suggested to a Senate committee that if inflation did not subside, the Fed could raise the benchmark interest rate, rate In a large percent half- Point at its March 21-22 meeting.

When the Fed raises key rateusually leads to higher rates on Mortgages auto Loans and credit cards And many more business loans.

when measuring against Prices a year In the past, inflation was declining for eight months. In February, consumer prices climbed 6% from the 12 months prior, down From 6.4% in January year-over-year Increase and good below Modern peak of 9.1% in June. However remains Well above the Fed’s 2% annual inflation target. Basic prices in February is up 5.5% from 12 months ago, down slightly from 5.6% in January.

Almost three-quarters of last Months price The increase was driven by housing costs. But most economists expect rent cost increases to slow down in The coming months as more Residential buildings are being constructed and new Lease agreements are signed in less price levels. like this decline It could further slow inflation.

the prices in The economy’s sprawling services sector continued to accelerate last Month. Restaurant prices rose 0.6% from January to February. Auto insurance jumped 0.9%, and hotel costs increased by a whopping 2.3%.

Airline ticket prices after easing for Several months, up 6.4% just in Feb and up 27% of a year since. The Fed is very focused on Labor intensive services price Paid increases in a large part of higher wages. labor shortage in Many service industries have led to sharp increases in wages.

Clothing costs increased by 0.8%. last Month. new car Prices are set up just 0.2% for a second month in a row. user car Prices fell 2.8% for the eighth month in a row decline.

Consumers get less of Grocery relief store. Food prices rose 0.3%. in February, the smallest monthly gain in Almost two years, although they still are up more From 10% of a year since.

the price of eggs, which were up 55% from a year Previously, it was down 6.7%. just in February.

That data support a quarter-a point rate raise” at the Federal Reserve meeting next said Rubella Farooqui, chief US economist at High Frequency Economics in a research NB. “the decision In the end it will not only depend on economic data however also financial Stability concerns, which could keep the Fed on Sidelines next week.”

Across the country, persistently high inflation continues to put pressure on many consumers.

Mani Bhushan who He owns four Taco Ocho restaurants in dallas areastruggled to keep it up with sharply higher the prices for Eggs, chicken, and flour black Bean. He has also They had to raise wages by about 30% attract And he keeps the workers he needs.

“I got hit Of all side,” he said. “We don’t make that much profit anymore.”

to cover him higher Costs, Bushan raised some of its prices last After a week of doing it four months ago. he plans to raise prices again in Maybe unless food prices fall further.

For the Fed, that hasn’t happened yet clear Whether to continue to raise interest rates at the level of next meeting for combat economic inflation.

Jan Hatzios, chief economist at Goldman Sachs, said Goldman now believes Fed policymakers will pause they rate He increases next week. Goldman had previously predicted a quarter-point rally. In a note to clients, Hatzios noted that the Fed, for Now, it seems even more focused on Cooling down the banking sector and financial markets from on fight inflation.

We’d be surprised if just one After a week of going to great lengths support financial stability, policymakers risked undermining their efforts by raising interest rates again, Hatzius wrote in Separate note Monday.

If the Fed did pause that it rate Hatzius predicted, this month, that these voyages are likely to resume when they happen next Meets in maybe. In the end, he still expects the Fed to raise its value key ratewhich affects many consumers and business loans, to about 5.4% this yearand up from current 4.6%.

The Fed may get a few unintentional help in Inflate it fight of the aftereffects of Meltdown of Silicon Valley Bank and New York-based Signature Bank. In response, many small And medium-sized banks may withdraw back on Lending to the beach up their financial resources. lower pace of can lend help cooling economy and slowing inflation.

the next Today, in testimony before a House committee, Powell warned that no final decision He was made On what the Fed will do at the March meeting. Still, on Friday , government I mentioned that employers added Strong 311,000 jobs last Month. It was tolerable sign of Continued high inflation, led to forecasts of A half point raise at the Fed meeting next week.

Later that day, though, Silicon Valley Bank failedand the rush altogether new set of Concerns about the Federal Reserve.

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