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Food and housing prices push annual U.S. inflation to 3.4%

Shoppers near Union Square in New York on December 19, 2023. (Maansi Srivastava/The New York Times/File)

he Rents and food prices rise promoted U.S. headline inflation in Decemberan indication that the activity United States Federal Reserve Keep inflation within target 2% will continue to be hard.

Thursday report Working department indicates an increase in overall prices 0.3% compared to November 3.4% Compared to 12 months ago. These increases exceeded the previous monthly increase of 0.1% in November and the annual inflation rate of 3.1%.

However, if you exclude the more volatile food and energy costs, so-called core prices rose by only 1 0.3% The month-on-month increase was the same as in November.Core prices increased 3.9% Compared with the same period last year, it was one-tenth less than the 4% year-on-year increase in November. Economists pay particular attention to underlying prices because they are thought to provide a better guide to the likely path of inflation by excluding costs that typically fluctuate from month to month.

Overall inflation has cooling more or less continuously Since reaching four-decade highs 9.1% Mid-2022.Still, the survey shows that persistently high inflation, despite solid economic growth, low unemployment and good employment conditions, helps explain why Many Americans are unhappy with the economywhich could be a key issue in the 2024 election.

On December 25, 2023, on the streets of New York, the United States, an independent barber was waiting for customers in his van. REUTERS/Eduardo Muñoz/File

The Federal Reserve began to raise interest rates sharply in March 2022 in an attempt to slow down the pace of price increases, hoping to reduce the year-on-year inflation rate to the target level 2%.

Overall, progress in the fight against inflation has been significant.One year ago, the year-on-year increase in the consumer price index was 6.5%well below four-decade highs 9.1% Recorded in June 2022, but still at painfully high levels. Additionally, wages have risen faster than inflation in recent months, meaning the average American’s take-home pay has increased after inflation.

There are good reasons to be optimistic that inflationary pressures will continue to subside in the coming months.

For example, the New York Federal Reserve reported this week that consumers now expect inflation to be just 3% Forecasts for next year are the lowest since January 2021.That’s important because consumers’ own expectations are considered a telltale sign of future inflation: When Americans worry that price increases will continue to accelerate, they typically They are in a hurry to buy something, sooner rather than later.This wave of spending tends to fuel inflation.

But this unpleasant cycle doesn’t seem to be happening.

On March 13, 2023, a man walked past the Federal Reserve Bank of New York in New York, USA. REUTERS/Brendan McDermid/File

When Fed officials discussed the outlook for inflation at their last meeting last month, they saw some hopeful signs: Delays at the end of the supply chain This has led to parts shortages and inflationary pressures, Decreased rental costsit begins to spread throughout the economy.

Many economists recommend curbing inflation 9% surrounding 3% Easier to achieve than to achieve goals 2% Fed.

A recruitment billboard outside a Starbucks in Manhattan, New York, USA. May 26, 2021.Reuters/Andrew Kelly/File

Last week’s U.S. jobs report for December contained some news that made the Fed cautious: average hourly earnings increased. 4.1% Compared with the previous year, it was slightly higher than 4% November.and 676,000 people have left the labor force, reducing the share of adults who are employed or looking for work. 62.5%the lowest level since February.

This can be concerning because when fewer people are looking for work, it often becomes harder for employers to find jobs.As a result, they may be forced to Significant salary increases to attract job seekers then affect Increase labor costs for customers by raising prices.This is a loop that can perpetuate inflation.

(Information from the Associated Press)

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