Rising gasoline costs kept inflation elevated in February, underscoring that the road to more modest consumer price increases following a pandemic-induced spike may continue to be bumpy.
The climb in fuel costs and rent offset flat food prices.
Overall prices rose 3.2% from a year earlier, slightly up from 3.1% in January, according to the Labor Department’s consumer price index. On a monthly basis, costs increased 0.4% following a 0.3% gain the previous month.
What is the core inflation rate right now?
Core prices, which exclude volatile food and energy items and are watched more closely by the Federal Reserve, increased 0.4% after a similar rise in January. That still lowered the annual increase from 3.9% to 3.8%, the smallest since May 2021.
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Are inflation rates going down?
Since hitting a 40-year high of 9.1% in June 2022, inflation has slowed substantially. But after swift progress in the fall, price increases have become more volatile.
Many goods, such as used cars, furniture and appliances, have gotten cheaper in the past year as pandemic-related supply chain snags have resolved. But the cost of services, such as rent, car insurance and transportation keep advancing, in part, because of sharply rising employee wages.
By the end of the year, Barclays expects overall inflation to slow modestly to 2.9% while the core reading drifts down to 3.1% – both still notably above the Fed’s 2% goal.
Will the Fed lower interest rates in 2024?
Fed Chair Jerome Powell told Congress last week that the central bank will likely trim its key interest rate this year but not until officials see more evidence that inflation is moving sustainably toward the Fed’s target. Since March 2022, the Fed has hiked its benchmark short-term rate from near zero to a 22-year high of 5% to 5.25% to corral inflation, though officials have paused since July.
In the past couple of months, futures markets have pushed out their forecast for the first Fed rate decrease from March to June and are now predicting four rate cuts this year, down from six.
Tuesday’s index report could prompt Fed officials to wait a bit longer, depending on inflation’s course over the next few months.
“While we thought a May rate cut was on the table, it is increasingly likely that the (Fed) waits at least until June” before starting to lower rates, says Nationwide Chief Economist Kathy Bostjancic.
‘I haven’t seen it get any better’
Pat Baldwin, of Detroit, says she and her husband will fork over $418 for two round-trip train tickets to Chicago during the Thanksgiving holiday this year, more than double the pre-pandemic price tag.
“It’s like astronomical,” says Baldwin, who is in her late 50s.
They’ll still take the trip, which will coincide with her husband’s birthday. But to offset the cost, they’ll forgo their traditional Christmas train ride to a small Michigan town.
While many Americans have notched big raises in recent years, finally helping them keep up with inflation, Baldwin says her pay has gone up every other year and lagged inflation.
“I haven’t seen it get any better,” says Baldwin, a program director for a foundation that develops classes and other activities for seniors.
Baldwin says she regularly makes trade-offs. Instead of buying hamburger or chicken at the grocery store, she waits until a protein is on sale and then stocks her refrigerator. Last fall, she had her eye on a $99 pair of dress shoes online but bided her time until they were discounted to $39 and then bought four pairs.
To save electricity, she now washes the couple’s clothes every three weeks instead of weekly and sometimes substitutes candles for lights.
Why are gas prices climbing again?
Gasoline prices rose 3.8% in February after four straight monthly declines. As spring draws closer, demand is rising and producers are switching to more expensive summer blends.
Will food prices go down in 2024?
Grocery prices were unchanged, lowering the annual increase to just 1% – the smallest since June 2021 – and providing consumers some relief from hefty price gains experienced over much of the past two years. The cost of commodities such as wheat, corn and soybeans generally have come down amid increased global production.
But the picture was mixed last month. Bread prices edged down 0.5%, pork fell 0.8% and chicken declined 1.3%.
But egg prices leaped 5.8% amid another avian flu outbreak, breakfast cereal rose 2%, and fish was up 0.4%.
Some good news: Restaurant bills inched up just 0.1% after a flurry of sharper increases tied to big employee wage hikes in response to labor shortages.
Why is rent so high in the US right now?
Rent remains the biggest contributor to inflation, rising 0.5% in February after several smaller…
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