Federal Reserve Chair Jerome Powell emphasized that inflation, after the worst price spike in four decades inflicted pain on millions of households, appears largely under control.
For nearly a year, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price surges that erupted three years ago, particularly for food, gas, rent and other necessities.
Some of America’s largest companies say their customers are increasingly seeking cheaper alternative products and services, searching for bargains or just avoiding items they deem too expensive.
Friday’s report from the Labor Department showed that employers added 35% fewer jobs than forecasters had expected and the unemployment rate hit its highest level since October 2021.
Higher wages and benefits are good for employees, but slower pay growth will likely reassure Federal Reserve officials that inflation is steadily falling back to their 2% target.
Inflation has fallen steadily for the past year. Even so, the costs of everyday necessities like groceries, gasoline and rent remain much higher than they were three years ago.
In his remarks Monday, Federal Reserve Chair Jerome Powell stressed that the Fed did not need to wait until inflation actually reached 2% to cut borrowing costs.
The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease.
PepsiCo’s and Conagra’s latest quarterly results suggest that consumers frustrated by rising prices are now spending less on established brands, particularly in the snack and soda aisles.
The June figures will qualify as another installment of the more good inflation data the central bank has been seeking. Should inflation remain low through the summer, most economists expect the Fed to begin cutting its benchmark rate in September.
Optimism is rising among economists, investors and Federal Reserve officials that U.S. inflation is nearly under control, with the latest report on consumer prices expected to show another month of mild increases.
The company disclosed the forthcoming 8% increase in the fee to gain entry into its more than 700 warehouses in the U.S. and Canada as part of a monthly sales report Wednesday.
The Federal Reserve has made “considerable progress” toward its goal of defeating the worst inflation spike in four decades, Chair Jerome Powell said in his testimony to the Senate Banking Committee.
After some persistently high inflation reports at the start of 2024, Powell said, the data for April and May “do suggest we are getting back on a disinflationary path.”
Prices for physical goods actually fell 0.4% from April to May. Gasoline prices, for example, dropped 3.4%, furniture prices 1% and the prices of recreational goods and vehicles 1.6%.
Some of America’s seniors will see their out of pocket costs fall for more than five dozen drugs—including treatments for osteoporosis and cancer—as part of the White House’s crackdown on rising pharmaceutical prices.
The policymakers’ forecast for one rate cut was down from a previous forecast of three, likely because inflation, despite having cooled in the past two months, remains persistently elevated.
Federal Reserve officials, who will end their latest policy meeting later Wednesday, are scrutinizing each month’s inflation data to assess their progress in their fight against rising prices.
Chair Jerome Powell is likely to underscore at a news conference Wednesday that the policymakers will need to see several more months of low inflation readings before they would consider reducing their key rate.
Friday’s report also showed that income growth slowed and spending cooled sharply in April, a trend that could help moderate economic growth and inflation in the coming months.
