The inflation-adjusted rate in the United States fell by 0.4% in February, exceeding experts’ expectations.
Treasury yields remain lower, mortgage rates are climbing steadily, the S&P started today in a low position, and the USD remains high. The inflation rate is rising and accelerating at high rates, and experts are raising red flags.
The U.S consumer didn’t feel the inflation impact due to the increase in payrolls, strong labor market, and saving strategies. However, the average consumer index has declined for this month. Now the buying activity is slowing down compared to the previous months.
The omicron cases are dropping in relieving numbers, and now people are getting back to their normal activities. However, recent events have resulted in higher price increases for food, energy, and necessities.
To put some numbers into perspective, here is what the inflation report included.
Inflation-adjusted spending in the United States fell by 0.4%, while Bloomberg experts predict that adjusted spending will fall by 0.2% at the top. If this indicates anything, it is that the United States is experiencing the fastest inflation growth in four decades, and may become the first in history.
The inflation rate is affecting consumer buying decisions and their spending priorities. Mortgage rates are steadily climbing, and now people are turning their attention to more rational spending.
As it appears people think of vacation homes as optional buys, that’s one factor why the home selling services are declining. It will take some time for the prices to get back to their normal rates.
U.S. families are in tough times since government aid isn’t reliable and the goods and food prices are high. At this rate, the sentiment for a 50 basis point interest hike is increasing.
Analysis believes that in the May meeting the Federal Reserve might increase interest rates by 50%. According to FED chairman Powell, the Federal Reserve will do anything to maintain its own prices, even at the price of slow economic growth.
On top of that, in May, July, and September, the Federal Reserve might raise its central bank interest by 50%.
Two factors are hitting the market now:
Inflation and the economical downturn that might result from the war might hit the market as well.
The US is attempting to wean other countries off of Russian oil, which may help to lower the price. Plus, its recent announcement of a plan indicates it will cut off Russia from the OPEC members.
According to Federal Reserve President Jerome Powel, time is uncertain. but, the United States appears confident in its ability to reduce inflation. Because and until now, the biggest threat to the U.S economy has been inflation. Consumers are getting tempered by recent hikes due to the fast and high increase in necessities.
Moreover, another factor must be taken into consideration by consumers, and that is the supply shortage. This suggests that prices are unlikely to fall anytime soon, forcing federal policymakers to become more aggressive.
In any case, with an aggressive interest rate hike or a high inflation rate, US consumers are in for some dark and uncertain times.
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