Due to a significant decline in gas and energy costs, it is anticipated that the pace of US inflation rate slowed marginally in December compared to the previous month.
What is Inflation?
The term “inflation” describes a long-term, widespread increase in the cost of products and services throughout the economy, which reduces both consumers’ and businesses’ purchasing power. In other words, a dollar will not buy as much today as it did yesterday. Take a regularly used item and compare its price over time to better understand the consequences of inflation. For instance, the price of a cup of coffee increased from 25 cents in 1970 to $1.59 in 2023. Therefore, in 2023 you could have purchased around three cups of coffee for $5 as opposed to 20 in 1970. That’s inflation, which goes beyond price increases for just one good or service; it also.
How US inflation rate has increased recently?
The percentage change in product and service prices “year-over-year” from one year to the next is what is referred to as the U.S. inflation rate by year.
Each stage of the business cycle influences the inflation rate. That is the normal cyclical ups and downs of economic growth. The cycle represents the peaks and troughs in a country’s gross domestic product (GDP), which is a measure of all the products and services generated there.
The amount that prices vary from year to year is shown by the U.S. inflation rate by year.
Comparative inflation rates, as opposed to annual average inflation, paint a more accurate picture of price fluctuations.
The Federal Reserve employs monetary policy to bring inflation to its desired level of 2%.
Following the COVID-19 pandemic in 2022, inflation climbed to 9.1% in June, its highest level since 1980.
|YEAR||INFLATION RATE||FED FUNDS RATE||GDP GROWTH||EVENTS AFFECTING INFLATION|
|2020||1.4%||0.25%||Contraction (-3.4%)||COVID – 19|
|2021||7.0%||0.25%||Expansion (5.9%)||COVID – 19|
How is the US inflation now?
According to U.S. Labour Department data released Jan. 12, the country’s annual inflation rate decreased from 7.1% to 6.5% for the year ending December 2022. On February 14, 2023, at 8:30 a.m. ET, the following inflation update is expected to be released. It will provide the inflation rate for the year that ended in January 2023.
The Consumer Price Index for the month of January 2023 is 296.797. Compared to the prior month’s inflation rate of 7.110%, the inflation rate over the past year is 6.454%. Between November 2022 and January 2023, there was -0.307% inflation.
Inflation is expected to have declined in December 2023
Due to a significant decline in gas and energy costs, it is anticipated that the pace of consumer inflation slowed marginally in December compared to the previous month, but the annual rate is still predicted to stay uncomfortably high.
The core CPI, which excludes energy and food, is predicted to increase by 0.3% in December 2023 and 5.7% on an annualized basis. In November, the Core CPI increased by 0.2% and by 6% annually.
At 8:30 a.m. ET on Thursday, the consumer price index is anticipated. This month’s CPI data is the last one before the Federal Reserve decides on interest rates on February 1. The inflation number has thus grown in importance for the financial markets, and some traders are already placing bets that it will reveal inflation slowing much faster than economists anticipate. In addition, they cite other data that shows lower inflation expectations as well as the jobs report for December’s weaker-than-anticipated wage growth.
The 2024 projection is reasonably close to the Federal Reserve’s inflation target of 2 percent.
The Impacts of Inflation on Lower-Income Families in US
At the moment, inflation is having some sort of impact on every American. Middle-class and upper-class households can deal with inflation in ways that don’t significantly affect their way of life or well-being. Lower-class and lower middle-class families, meanwhile, are subject to lifestyle restrictions. The following are some difficulties that households with low to moderate incomes have as a result of inflation.
lengthier weeks and hours of work. Hourly pay is sometimes adjusted for inflation, although it typically lags far behind. Breadwinners occasionally have to work longer hours and more days per week in order to afford typical expenses because many low-paying occupations allow employees to change their hours.
deciding between caregiving and more lucrative employment. Caregivers tend to be female. Many are compelled to pass up opportunities for full-time or higher-paying work due to their limited availability, in addition to the disadvantages they already experience as a result of the gender pay gap that is still there. This unrealized earning potential can contribute to wider racial wealth gaps and generational poverty in homes headed by single moms.
Basic necessities are not being met by assistance programs. Due to financing restrictions, families who depend on aid from non-profit groups are being placed on waitlists or being completely turned away. Many suffering families are ineligible for the programs they require because eligibility for several government assistance programs is increased more slowly than inflation.