Many factors lie behind the disconnect, but economists increasingly point to one in particular: The lingering financial and psychological effects of the worst bout of inflation in four decades.
The latest monthly report offers a dose of encouragement as the Federal Reserve looks for enough progress to let up on its fight to tame consumer prices and slow the economy.
Policymakers are grappling with how much more pressure to keep on an economy that has largely shrugged off the central bank’s moves to slow it down.
Candy giant Hershey Co.—which has raised its prices by 7% or more in each of the last seven quarters—acknowledged this week that higher prices are taking a toll on demand.
September’s month-to-month price increase exceeds a pace consistent with the Fed’s 2% annual inflation target, and it compounds already higher costs for such necessities as rent, food and gas.
Federal Reserve Chair Jerome Powell said Thursday that inflation remains too high.
The average employer-sponsored health insurance premium for U.S. families rose 7%, according to an annual KFF survey of more than 2,000 U.S. companies.
Recent inflation data underscore how a strong labor market is underpinning consumer demand, which risks keeping price pressures above the Fed’s target.
Federal Reserve officials regarded the U.S. economy’s outlook as particularly uncertain last month, according to minutes released Wednesday, and said they would “proceed carefully.”
The numbers, driven by an uptick in the price of goods, came in higher last month than economists had expected.
Excluding volatile food and energy prices, “core” inflation rose by the smallest amount in nearly three years, evidence that inflation pressures continue to ease.
Last year’s spike in inflation, to the highest level in four decades, was painful enough for American households. Yet the cure—much higher interest rates, to cool spending and hiring—was expected to bring even more pain.
Further clues about the future path of the Fed’s interest rate policy could emerge at a news conference Wednesday after the central bank issues a policy statement and its quarterly economic projections.
Gas costs drove inflation in August, rising 10.6 percent over the month and accounting for more than half of the increase over July. All other major energy categories rose as well.
The latest data follows other recent reports that suggest the economy and the job market may be slowing enough to cool inflation pressures.
Rising trade barriers, aging populations and broad transition to renewable energy are trends that could make it harder for the Federal Reserve and other central banks to meet their inflation targets.
In a closely watched speech at Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell said the economy has been growing faster than expected and consumers are spending briskly—trends that could keep inflation pressures high.
Most Federal Reserve officials last month still regarded high inflation as an ongoing problem that could require further interest rate increases, according to the minutes of their July 25-26 meeting released Wednesday.
While price increases have cooled over the past year—the inflation rate has dropped from 9% to 3.2%—most economists say little to none of the drop came from the law.
Wholesale prices in the United States picked up in July, yet the numbers still suggested that inflationary pressures have eased this year since reaching alarming heights in 2022.
