Around the world, consumers are still reeling from the economic impacts of the pandemic. For the past two years, staple goods, gasoline and energy prices have been exceptionally high, putting pressure on many households.
In the US, inflation has been at a 40-year high and sparked fears of a recession. But, the good news is that the latest figures show that US inflation slows down – will it continue? Find out below.
The Global Cost Of Living Crisis
Living during the pandemic had challenges, but countries have faced tremendous financial upheaval since emerging. Consumers around the globe have faced massive price increases on staple goods, which has led to a global cost of living crisis.
Inflation peaked during the pandemic, and due to industrial inactivity, when countries reopened, there weren’t enough supplies to meet demands, which increased rates further.
According to Euro News, the outbreak of the Ukraine war also caused massive disruption to the economy. It interrupted food supply chains, driving up the prices of staple goods – and disrupted oil supplies, increasing fuel and energy prices. Even Bird flu has impacted egg prices.
US Inflation Slows Down
Since last year, US inflation has been slowing. Forbes reports that in April, rates were at 4.9% – down from 5% in March. It’s the first time they’ve dipped below 5% since 2021, but they still have a long way to go before reaching the 2% Federal Reserve (FED) target.
Overall, inflation is falling, but consumers still face high prices. According to The Bureau of Labor Statistics, the Consumer Price Index (CPI), which measures basket goods and services, rose 0.4% in April from 0.1% in March.
The CPI peaked in March last year when rates rose to 4.75%, the highest since 2007.
Food prices have yet to stabilize, but gasoline prices have dropped to $3.64 – down from $5 in June, and so have used cars and rent prices. Consumers are still paying more than usual for basic items, but many aspects of the economy are improving.
According to AlJazeera, Unemployment is at 3.4% – the lowest in 53 years. But this causes consumer prices to remain high because businesses must offer high wages. Wages increased by 5% since last year, but the FED aims for a 3.5% wage rate to help reach their 2% target.
Is There Light At The End Of The Tunnel?
Figures show that inflation is slowing down in the US and could stabilize by the middle of 2023, but consumers aren’t out of the storm yet. The economy is more balanced but unpredictable, and there could still be a long way to go.
According to Forbes, economists predict inflation will fall to 4 percent this year. But it could plateau, meaning the FED will keep borrowing rates high or even raise them more. President and CEO Patrick Harke of the Federal Reserve Bank of Philadelphia said in January:
“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Harker said. “In my view, hikes of 25 basis points will be appropriate going forward.”