Food price inflation

Searing inflation is costing Americans an extra $460 a month, analysis finds

The average American pays $460 more per month because of the highest inflation in decadesaccording to a new analysis from Moody’s Analytics.

Financial pressure stems from the rising cost of a number of everyday consumer goods, including cars, rent, food, gas and health care.

INFLATION TIMELINE: MAPPING THE BIDEN ADMINISTRATION’S RESPONSE TO RAPID PRICE GROWTH

Inflation accelerated further in May, The Department of Labor reported last week, with the consumer price index rising 8.6%, much more than economists had expected. It marks the fastest pace of inflation since December 1981, underscoring how strong inflationary pressures in the economy still are.

Food price inflation

A customer buys produce at a market in Cardenas on June 8, 2022 in San Rafael, California. ((Photo by Justin Sullivan/Getty Images)/Getty Images)

The analysis was led by Moody’s economist Ryan Sweet, who arrived at the figure by comparing the prices of goods and services in May to how much households would have paid for those same items when inflation was 2.1%, the average in 2018 and 2019.

Searing inflation has created severe financial pressures for most American households, which are forced to pay more for daily necessities like food, gas and rent. The burden is borne disproportionately by low-income Americans, whose already-stretched paychecks are hit hard by price swings.

Rising prices are eating away at the strong pay rises U.S. workers have seen in recent months: Real average hourly wages fell 0.6% in May from a month earlier as rising inflation eroded wage growth total of 0.3%, according to the Labor Department. On an annual basis, real incomes even fell by 3% in May.

Creeping inflation has become a major political handicap for Biden ahead of November’s midterm elections, in which Democrats are expected to lose their already slim majorities. Surveys show that Americans see inflation as the biggest problem facing the country — and that many households blame Biden for soaring prices.

Federal Reserve Chairman Jerome Powell

U.S. Federal Reserve Chairman Jerome Powell speaks during a news conference on interest rates, the economy, and monetary policy actions, at the Federal Reserve Building in Washington, DC, June 15 2022. ((Photo by OLIVIER DOULIERY/AFP via Getty Images) / Getty Images)

Rising prices have also had major implications for the Federal Reserve, which is moving at the most aggressive pace in decades to fight inflation and raise interest rates. On Wednesday, policymakers approved a 75 basis point rate hike, the first since 1994, and signaled another big hike could come in July.

GET FOX BUSINESS ON THE ROAD BY CLICKING HERE

But the Fed is in a precarious position as it makes the choice between cooling consumer demand and bringing inflation closer to its 2% target without inadvertently dragging the economy into a recession. Rising rates tend to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut spending.

“The Fed is now between a rock and a hard place,” said Peter Earle, a researcher at the American Institute for Economic Research. “Acting more aggressively to stem rising prices increases the likelihood of triggering a recession.”

Leave a Comment

Your email address will not be published.