Robust consumer spending has combined with widespread product and worker shortages to create the highest inflation in four decades—a heavy burden for U.S. households, especially lower-income families faced with elevated costs for food, fuel and rent.
The worries rocking Wall Street about interest rates, inflation and now Ukraine have sent the S&P 500 index—the most widely followed measure of the U.S. stock market—tumbling more than 10% from its record.
Federal Reserve Governor Michelle Bowman said Monday that she was open to lifting interest rates by more than the traditional quarter-point at the central bank’s next meeting in March.
Fed officials are expected to raise their benchmark short-term rate several times this year beginning in March. But economists have increasingly suggested that the Fed has waited too long to unleash its inflation-fighting tools.
The brewer said it will raise prices for its beer by “courageous” amounts as it seeks to offset rising raw material and energy costs and “crazy” shipping rates.
Volatility in retail sales data is emerging after the pandemic and as related supply crunches drastically altered the behavior of Americans
Costs for 30-year loans hit a more than two-year high of 3.69% last week, rising about 20% just since Christmas. Further increases are expected as the Federal Reserve, trying to curb inflation, hikes its benchmark rate.
Inflation, under control for four decades, re-emerged as an economic issue last year as the United States rebounded with unexpected speed from 2020’s short but devastating coronavirus recession.
A worsening inflation picture has touched off a range of opinions from the Federal Reserve’s policymakers about just how fast they should raise interest rates.
The acceleration of prices ranged across the economy, from food and furniture to apartment rents, airline fares and electricity.
The persistence of inflation, now running at an annual rate of 7%, has provided ammunition to conservative critics of the central bank known as “monetarists” for their adherence to the writings of economist Milton Friedman.
The report Friday from the Commerce Department also said that consumer spending fell 0.6% in December, with purchases of cars, electronics, and clothes declining.
With high inflation squeezing consumers and businesses and unemployment falling steadily, the Fed also said it would phase out its monthly bond purchases, which have been intended to lower longer-term rates, in March.
Target’s top executive said U.S. consumers will drive less and consolidate their shopping into fewer trips as they adjust to pricier gasoline and the highest inflation rate in almost four decades.
Rising prices have wiped out the healthy pay increases that many Americans have been receiving, making it harder for households, especially lower-income families, to afford basic expenses.
Fed officials now expect to raise short-term interest rates three times this year, a sharp shift from September, when they were divided over doing it even once. Economists increasingly expect them to raise rates at least four times in 2022.
On Wednesday, the government is expected to report that consumer prices jumped 7.1% over the past 12 months, which would be the steepest such increase in decades.
But prospects for a solid rebound going forward are being clouded by the rapid spread of the latest variant of the coronavirus.
The government’s report last week that consumer prices jumped 6.8% over the past year showed that some of the largest cost spikes have been for such necessities as food, energy, housing, autos and clothing.
The Fed’s policy change does carry risks. Raising borrowing costs too fast could stifle consumer and business spending. That, in turn, would weaken the economy and likely raise unemployment.
