Despite a 10.6% decline in gas prices, increased prices for shelter, food and medical care accounted for the elevated rate of inflation. The rate of inflation was higher than expected in August, suggesting that inflation is far from under control. Continued interest rate hikes from the Federal Reserve are also likely.
Here's how much prices have increased over the past year for certain household goods and services, according to the Labor Department:
• Gas: 25.6%
• Airline fares: 33.4%
• Electricity: 15.8%
• Food at home: 13.5%
• New vehicles: 10.1%
• Food away from home: 8%
• Used cars and trucks: 7.8%
• Shelter: 6.2%
• Medical care services: 5.6%
• Apparel: 5.1%
With these disappointing inflation numbers, expect interest rate hikes to continue. In a recent speech, Federal Reserve chairman Jerome Powell reaffirmed the central bank's commitment to reducing inflation, stating that "we will keep at it until we are confident the job is done" and that Fed policy will "bring some pain to households and businesses."
To reduce inflation down to a benchmark target rate of 2%, the Federal Reserve has already implemented four interest rate hikes in 2022, including two consecutive "jumbo" rate hikes of 0.75% in June and July. The federal funds rate is currently 2.25% to 2.50%.
Although inflation remains high in US, we saw signs that inflation is gradually slowing down despite at a lower pace. Hence, I think that Fed will likely implement another rate hike of 0.75% when the Federal Open Market Committee meets later in September. Beyond that, more rate hikes are likely if the rate of inflation is still not under control!!
Comments