Kevin Mahn, president and CIO of Hennion & Walsh Asset Management, discusses the status of the Fed's fight against inflation on “The Big Money Show” after consumer prices rose more than expected in December. talked about.
Inflation has fallen significantly from its 2022 highs, but the last mile to price stability may be the most challenging.
The Department of Labor reported last week: consumer price index It accelerated again in December as energy and housing costs soared, underscoring the challenge of containing price pressures within the economy.
According to the data, the inflation rate rose 0.3% in December compared to the previous month, and continued to rise 3.4% compared to the same period last year. Both numbers were higher than expected by economists surveyed by Refinitiv.
“Inflation will continue to moderate, but we have long maintained that the final stages of the Fed's efforts will not necessarily result in 2% interest rates over the long term,” said Joe Brusuelas, chief economist at RSM. Ta. “The evolution of data shows how difficult the last mile is.”
The Fed's fight against inflation is weighing heavily on middle Americans.
Customers shop at a supermarket on September 13, 2023 in Foster City, California. (Photo credit: Li Jianguo/Xinhua News Agency via Getty Images/Getty Images)
Elsewhere in the report, inflation is slow to recede. Core prices, which exclude more volatile food and energy measures, rose 0.3% annually, or 3.9%. Both of these numbers are slightly higher than estimates. However, this is the first time since May 2021 that the core inflation rate has fallen below 4%.
Inflation has fallen significantly since June 2022, when it peaked at 9.1%, but prices remain well above the Federal Reserve's 2% target. And just before that, compared to January 2021, the inflation crisis has begunprices rose by a whopping 17.6%.
When will the Federal Reserve start cutting interest rates?
“December was a clear setback in the two-steps-forward, one-steps-back inflation war,” said Robert Frick, business economist at Navy Federal Credit Union. “Half of the increase was accounted for by shelter prices, with little prospect of relief as rents remain high and home ownership costs rise. Consumers felt the most immediate pain in December. “These are the two products Americans are most sensitive to: rising food and energy prices.” “
caused by high inflation severe financial pressure Most American households are being forced to pay more for everyday necessities like food and rent. Food prices have increased 33.7% since the beginning of 2021, and shelter costs have increased 18.7%, according to FOX Business calculations. Meanwhile, energy prices have increased by 32.8%.
Pedestrians near the U.S. Treasury Building on December 30, 2022 in Washington, DC. (Photographer: Ting Sheng/Bloomberg via Getty Images/Getty Images)
The burden falls disproportionately on low-income Americans, whose already maxed-out paychecks are heavily affected by price fluctuations.
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The typical American household had to pay $211 more per month in December to buy the same goods and services as they did a year ago. Inflation remains high, according to new calculations from Moody's Analytics. Americans are paying an average of $1,020 more each month than they did during the same period two years ago.
Fed officials acknowledged that while they made better-than-expected progress in 2023, they still have some way to go on the inflation front.
Atlanta Fed President Rafael Bostic warned that the decline in inflation toward 2% could slow in recent months.
“We expect inflation to continue to slow down further,” said Bostic, who will be a voting member of the Federal Open Market Committee this year. He also said there were “some risks that inflation could stall completely.”
