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.
The increase in wholesale prices was widespread, led by a 1.2% increase in the cost of goods and a 0.7% rise in the price of services.
Across the United States, in homes and in businesses, the highest inflation in a generation is heightening financial pressures and forcing people to adapt to a new reality.
The Labor Department also reported Friday that prices rose 0.8% from October to November—a substantial increase, though slightly less than 0.9% increase from September to October.
Most people say the sharply higher prices for goods and services in recent months have had at least a minor effect on their financial lives, including about 4 in 10 who say the hit has been substantial.
The nation’s business economists have sharply raised their forecasts for inflation, predicting an extension of the price spikes that have resulted in large part from bottlenecked supply chains.
Chairman Jerome Powell said Tuesday that the Federal Reserve will consider acting more quickly to dial back its ultra-low-interest rate policies to counter higher inflation. His remarks quickly accelerated losses on Wall Street.
U.S. consumer spending rebounded in October, rising by a a solid 1.3% despite rising inflation that over the past year has reached the fastest pace in more than three decades.
The expectation is that the economy in the current October-December quarter could grow at the strongest pace this year, with some economists forecast GDP could surge to an 8% rate in the fourth quarter.
After 35 years of selling goods for a buck, Dollar Tree is boosting its standard price point to $1.25, the company said in a statement Tuesday.
Experts said tree buyers should expect to pay between 10% and 30% more for both live trees and artificial trees this year and also have a smaller selection to choose from.
The Indiana Farm Bureau is out with its annual Thanksgiving market basket survey and it shows Hoosier shoppers can expect to spend about 12% more at the grocery store this year than in 2020 for the family feast.
Inflation is eating into recent wage increases, and the timing couldn’t be worse after federal pandemic relief expired for about 7.5 million people.
Solid hiring, strong pay raises, and healthy savings for many households are underpinning robust spending. But much of the sales increase reflected higher prices.
As any American who has bought a carton of milk, a gallon of gas or a used car could tell you, inflation has settled in. And economists are now voicing a more discouraging message.
