The Social Security Administration this week announced a 2.5% cost of living adjustment (COLA) for this year, a more modest increase in people's retirement and benefit plans that reflects the economy's easing inflation.
Last year's growth rate was 3.2%. It increased by 8.7% in 2022 and by 5.9% in 2021. These numbers are calculated as follows: formula Based on the Department of Labor's Consumer Price Index for Urban Wage and Office Workers (CPI-W).
The amount of the increase typically varies depending on the level of inflation that year. Inflation is currently on the rise September CPI-W This is an annual increase of 2.25%. In September last year, it increased by 3.56% annually, and by September 2022, it increased by 8.46% annually.
The calculation details are anchored to the CPI-W average recorded in the third fiscal quarter's BLS data.
As detailed by the Social Security Administration, “The COLA that goes into effect in December of this year is equal to the percentage increase, if any, in CPI-W from the average of the third quarter of this year to the average of the third quarter. ” The quarter of last year when the COLA went into effect. ”
As the economy weathered the post-pandemic inflation crest, Social Security COLA amounts increased, then subsided, and annual price increases narrowed toward the Federal Reserve's 2% target rate. Overall inflation has become almost unnoticeable to consumers.
The decline in inflation followed a sharp rise in interest rates and a contraction in the Fed's balance sheet, but temporary factors such as the renormalization of supply chains and the economic uptake of various types of stimulus packages also played a role. It is highly likely that he did.
With inflation falling significantly, the Fed began lowering interest rates to encourage growth and investment with cheaper interbank lending. Although these interest rates often do not fully mirror the level of a consumer's savings account, they are below mortgage rates and other types of loans, providing a degree of peace of mind for many consumers. brings a feeling.
The economy may now be nearing a tipping point, but it's not exactly clear. According to a business sentiment survey released this week by accounting firm PwC, 61% of business owners believe a recession will occur within the next six months. Meanwhile, U.S. central bankers continue to express confidence in the economy.
Recent economic data in the United States has been very strong, with GDP growing 3% in the second quarter, unemployment falling for the second straight month after spiking over the summer, and inflation falling 2.0% in August. The rate fell from 6% to 2.4% in August. September.
CPI inflation has been declining continuously over the past six months after hovering above 3% in the summer of 2023-2024.
