Inflation is falling, but food is still expensive to buy. According to the Bureau of Labor Statistics, food prices have risen 21% over the past three years, outpacing the overall inflation rate of 18% over the same period.
Fed officials expressed concern at their March policy meeting that price pressures in the economy were rising again, even before the government reported that inflation had picked up again last month.
Minutes of the U.S. central bank’s March meeting released Wednesday showed officials continue to pay attention to: inflation riskAnd some worry that progress toward the Fed’s 2% goal could stall.
“Participants generally noted uncertainty about the persistence of high inflation and expressed the view that recent data do not increase confidence that inflation is sustainably falling to 2%,” the report said. ” he said.
Why are groceries still so expensive?
Fed officials reiterated that interest rates are likely to have peaked, but also said they were hesitant to start lowering rates due to concerns it could trigger higher inflation.
Federal Reserve Chairman Jerome Powell speaks at a press conference on March 22, 2023 in Washington, DC. (Al Drago/via Bloomberg/Getty Images)
“Participants noted strong economic momentum indicators and disappointing inflation numbers in recent months, and agreed to keep the federal funds rate target until there is greater confidence that inflation is sustainably on track. “He commented that he did not expect it to be appropriate to lower the range to 2%,” the minutes said.
Jamie Dimon warns that inflation, interest rates may remain high
Officials voted in procession But policymakers expect three rate cuts this year, despite a flurry of inflation reports that show inflation is losing momentum.
Minutes show that “nearly all” officials supported cutting rates at some point this year.
But the latest consumer price index data released Wednesday morning could put a damper on those predictions.
Shoppers are seen at a Kroger supermarket in Atlanta on October 14, 2022. (Elijah Nouvage/AFP via/Getty Images)
According to the report, inflation rose 3.5% in March, the highest level since September 2023, due to soaring gas and rent prices. Inflation was higher than expected for the third month in a row, highlighting the difficulty of containing price increases.
Other parts of the report also point to stubborn price pressures within the economy. Core prices, which exclude more volatile food and energy measures, rose 0.4% in January and February, as they did in January and February, and rose 3.8% for the year. These numbers are also higher than expected.
CLICK HERE TO GET FOX BUSINESS ON THE GO
According to CME Group’s FedWatch tool, market prices currently indicate the Fed is only likely to cut rates twice this year, with the first not occurring until September.
“In fact, even if next month’s inflation rate cools to a more comfortable reading, there is likely enough caution now within the Fed that the July rate cut may be going too far. By that point, the US election will start to have an impact on the Fed’s decisions,” said Seema Shah, chief global strategist at Principal Asset Management.
