Business Maverick: Prices in US Outstrip Forecasts in Sign of Inflation Persisting

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ARCHIVES: US consumer prices rose by more than forecast in April, indicating inflation will persist at elevated levels for longer and keeping the Federal Reserve on the path of aggressive interest-rate hikes.

The core consumer price index, which excludes food and energy, increased 0.6% from a month earlier and 6.2% from April 2021, according to Labor Department data released Wednesday. The broader CPI rose 0.3% from the prior month and 8.3% on an annual basis, a slight cooling but still among the highest readings in decades.

“The peak of inflation may be behind us, but today’s CPI report points to a long, slow descent or maybe even a plateau around 8%,” said Robert Frick, corporate economist at Navy Federal Credit Union.While the latest report shows that US inflation has likely peaked, the figures underscore the breadth of price increases in the economy and, when combined with firm wage growth, suggest high inflation will persist for some time.

Inflation has put President Joe Biden and Democrats on their heels this year, threatening their thin congressional majorities despite a robust job market and resilient consumer spending.A key expectation for a moderation in inflation this year hinges on slowdown in goods prices as Americans shift their discretionary income to activities like travel and dining out. The rate of goods and other commodities inflation declined while services costs increased by the most since 2001 on a monthly basis.

Shelter costs — which are the biggest services’ component and make up about a third of the overall index — rose 0.5% for a third straight month. Rent of primary residence climbed 0.6%, while owners’ equivalent rent increased by the most since 2006.

 

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