Home Economy Inflation came in faster than expected in August, even as gas prices fell

Inflation came in faster than expected in August, even as gas prices fell

by SuperiorInvest

As inflation in goods persists, inflation in services is also rising – especially in the area of ​​housing costs. Cover inflation rose sharply in August, with a rental arrangements climbing at the fastest pace since the 1980s. This is important because housing-related prices account for about a third of overall inflation and are expected to remain elevated for some time.

Still, there are reasons to hope that inflation could subside in the coming months. Continuous supply chain improvement can help. The recent declines in fuel and grain prices could simply take a while to pass through to consumers. Used car prices could fall further, according to wholesale data.

However, there are also risks of further pressures exploding. Chinese lockdown due to the prevention of the coronavirus remain in some cities, and Russia’s war in Ukraine represents continued uncertainty about global food and gas prices.

Given the huge uncertainty, the Fed is likely to maintain its dovish stance. Central bankers are wary of pulling back too soon because they fear that if they fail to curb inflation now, it will become a more permanent feature of the economy.

If people and companies expect prices to rise year after year, they may begin to behave accordingly, with workers demanding better pay rises and firms still passing on higher costs to consumers.

Inflation expectations they actually refused in recent months, a possible sign that lower gas prices and recent Fed actions have helped convince consumers that today’s rapid price hikes won’t last forever. However, central bankers have made it clear that they do not want to take it for granted that this will remain the case and that they are very attuned to how consumers think about inflation.

“It’s very much our view and my view that we need to act openly, forcefully now, as we have been doing,” Fed Chairman Jerome H. Powell said at a conference last week. “And we have to keep at it until the job is done.

Jim Tankersley, Joe Rennison and Ben Casselman contributed reporting.

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