“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Jerome H. Powell, the Fed chair, told Congress last week. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”
Even as the Fed prepares to rein in demand, high gas costs tied to the conflict in Ukraine threaten to keep inflation elevated for longer. They could become a serious issue for central bank policymakers if they help convince consumers that the burst in prices will last. If people begin to expect inflation, they may change their behavior in ways that make it more permanent — accepting price increases more readily and asking for bigger raises to keep up.
This is just the latest instance, as far as prices go, in which what can go wrong does seem to be going wrong.
Inflation F.A.Q.
Card 1 of 6
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Fast inflation began to kick in early last year, and economists initially predicted that it would fade by the end of 2021 as the economy reopened from the pandemic and conditions returned to normal.
Instead, turmoil in supply chains collided with strong consumer demand for goods, and price gains accelerated. Now, how quickly and how much prices will moderate in 2022 are increasingly uncertain as the war in Ukraine threatens to keep shipping routes tangled and key parts scarce. Ukraine is an important producer of neon, which could keep computer chips in short supply, perpetuating the shortages that have plagued automakers. Higher energy costs could ricochet through other industries.
Article source: https://www.nytimes.com/2022/03/10/business/economy/cpi-inflation-february-2022.html
Speak Your Mind
You must be logged in to post a comment.