The good news is that inflation decreased by 0.1 percent from November and is now at 6.5 percent from a year ago, which is a significant decrease from November when it was at 7.1 percent. The bad news is that this was mostly caused by falling energy prices.
“The Dow Jones estimate, the CPI, which calculates the price of a large variety of services and goods, decreased 0.1% for the month. This is due to the fact that a large portion of the country was under lockdown because of Covid-19, this amounted to the largest month-over-month decrease since April 2020.”
“Even with the decrease, the headline CPI increased 6.5% from a year earlier, underscoring the ongoing strain that rising living costs have had on American consumers. But since October 2021, that was the smallest yearly increase.”
The core CPI, which doesn’t take into account volatile energy and food costs, increased 0.3%, thus above predictions. Once again in line, core was up 5.7% from a year earlier.
Fuel oil decreased in price by around 16.6% for the month, which caused the energy index to fall by 4.5%. However, there was a 0.3% modest increase in food costs.
The United States is still in trouble, as the Wall Street Journal notes.
The updated inflation statistics come after a number of indicators indicate the US economy slowed down in late 2022. In November compared to October, the United States’ imports and exports decreased, while retail sales, manufacturing output, and house sales were also down. The growth of jobs and wages slowed down in December.
Jamie Dimon, chief executive of JPMorgan Chase & Co., stated that in order to contain inflation, the Fed may need to raise its federal funds rate to 6%. That would be higher than the peak rate of 5% to 5.5% in 2023 that the majority of Fed officials projected following their meeting in December.
“The rate of inflation won’t quite decline as anticipated,” according to Mr. Dimon. “But it will undoubtedly start to decline a little.”
In line with that, Jerome Powell of the Federal Reserve has said that more interest rate increases are anticipated.
Powell stated that “price stability is the bedrock of a strong economy and provides the public with enormous advantages over time.” However, when inflation is excessive, maintaining price stability may necessitate actions that are unpopular in the near term when interest rates are increased to slow the economy.
“The lack of direct political control over our choices,” he said, “allows us to take these important changes without contemplating short-term political factors.”
In other words, you may anticipate the Fed to carry on as usual. The Biden administration, on the other hand, applauds today’s news as evidence that the President’s strategy for economic recovery is effective.
However, most economic indicators signal that the U.S. may still need to prepare for a recession. If they haven’t already, Americans should start saving, say financial experts, and economists are noticing clues in the most recent employment data that suggest companies may be preparing for trouble.