Inflation at record highs, above 8.5%, caused by strong demand, disruptions in supply chains and skyrocketing energy costs as a result of the war in Ukraine. Fighting the heating of the economy has definitely become a political objective, with rising prices as the main enemy to defeat, for President Joe Biden in view of the March data, 8.5%, the highest in the last four decades. In February, the interannual rate had reached 7.9%.
The US consumer price index increased again in March and registered for the first time the impact of the war in Ukraine on the domestic economy, especially in the cost of gasoline, with an all-time high of 4.33 average dollars per gallon (3.7 liters). The expected figure – most analysts expected a year-on-year rise of 8.4% – cements the next rise in interest rates at 0.50 percentage points that the Federal Reserve will predictably announce at its next meeting in May. The first increase in the price of money occurred in March, when rates rose 0.25 points.
Although the price of fuels is the main responsible for the increase in the CPI in March, the increase in food prices and rents have also had a considerable influence. The consumer price index rose 1.2% in its monthly rate in March, the largest increase since September 2005, as reported by the US Bureau of Statistics on Tuesday. The rise in prices is therefore accelerating : in February it had increased by 0.8%.
Core inflation, excluding energy and food prices, which are more volatile, rose by 0.3% in March, and by 6.5% in its year-on-year rate. This is the type of inflation that most worries experts, since it indicates persistent or structural trends. Regarding the rise in energy and food prices, the data published this Tuesday show a year-on-year rise of 32% and 8.8%, respectively, in the last year.
The suffocation that the rise in prices is causing in households -rent prices have skyrocketed and even food banks lament shortage problems due to the cost of food- forces President Joe Biden to fight inflation as a political and electoral base. The horizon of the mid-term elections, next November, pushes the Administration to adopt unprecedented measures, such as allowing the sale of gasoline with a higher ethanol content this summer, temporarily eliminating a restriction that blocks the mixture in the hottest months. hot. The measure could lower the price of gasoline by about 10 cents per gallon, according to New York Times.
Another initiative of the White House is the massive release of millions of barrels of crude oil from the country’s strategic reserves, to compensate for the interruption of Russian oil supply, as well as to encourage domestic oil and gas production.
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Prices are going up outrageously, all you have to do is make a purchase in a supermarket to confirm it, but long-term inflation expectations are not doing so much. This Monday, the Fed reported that inflation forecasts for the next three years, according to a consumer survey, fell to 3.7%, significantly below the data harvested the previous month and readings of more than 4% at the end of last year. However, the uncertain course of the war in Ukraine, which hovers like a shadow over the global economy, invites us to handle forecasts with caution. Everything can get worse, as shown by the inflation data, shot up in the US since economic activity began to show signs of recovery after the pandemic, a year ago now.
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