US inflation falls to its lowest in more than a year

US inflation

Image Source: Bloomberg

The rising US inflation is being eased by a sharp drop in energy prices, especially gasoline.

The US Labor Department said that over the past 12 months, US inflation was 6.5%, down from 7.1% in November.

That was the slowest increase in more than a year and the sixth month when the pace went down.

Some things, like oranges and bananas, went down in price between November and December.

Overall, prices went down 0.1% over the past month. This was because the price of gasoline went down.

President Joe Biden praised the report in a speech on Thursday.

He said, “It’s clear we’re going in the right direction.” “All of this adds a real break for consumers and more space for families to breathe.”

But some analysts warned that the lower energy prices were spreading slower than hoped to other things.

For example, clothing prices went up 0.5% from November to December and were up 2.9% from a year ago.

Federal Reserve fights against US inflation

Authorities in the US have been working hard to keep prices from going up. However, prices increased significantly in 2021 when the economy started to grow again after being shut down because of a pandemic. This was because companies had to raise prices because of shortages and rising costs.

The war in Ukraine hurt food and energy supplies, worsening the problem. In June, inflation reached 9.1%, which was the highest rate in more than 40 years.

Last year, the US central bank raised interest rates at the fastest rate in decades to try to get inflation back to 2%, which it thinks is a healthy level.

Last month, Jerome Powell, the head of the Federal Reserve, said that the bank would start to move less quickly to see how the changes affect the economy.

The Federal Reserve hopes to reduce the demand for expensive things like homes and cars by making it more expensive to borrow money. This will slow down the economy and take some of the pressure off prices.

People are paying close attention to its fight because the slowdown caused by higher rates could also push the world’s largest economy into a recession.

According to a report from the Labor Department on Thursday, gas prices were 1.5% lower in December than in the year before. In addition, used cars and trucks cost 8.8% less than they did a year ago.

But Seema Shah, the chief global strategist at Principal Asset Management, said that the US inflation report was “a little underwhelming” and didn’t say much about the bank’s future.

Strong growth in jobs in December

In the US, job growth stayed strong last month, even though the economy was struggling with the effects of prices that were going up quickly.

In December, despite the US inflation, employers added 223,000 jobs, which brought the unemployment rate down to 3.5% from 3.6% in November.

The job market’s strength has given people hope that the largest economy in the world will avoid a serious economic downturn this year.

The US central bank is trying to slow down the economy and ease price pressures by raising the cost of borrowing money.

As companies try to deal with the effects of higher interest rates and the possibility that consumers will spend less, the news that banks and tech companies like Amazon are cutting many jobs has gotten much attention.

But a monthly report from the US Labor Department showed that jobs were being added in almost every part of the economy. Bars, restaurants, healthcare, and construction companies contributed to the growth.

Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has been keeping track of job loss announcements since the 1990s, said that even though job losses are on the rise, especially in the tech sector, the numbers were still close to all-time lows last year.

Since 2021, when the pandemic reopened and caused the economy to grow quickly, it has slowed down a lot.

Higher borrowing costs are hurting businesses in housing and banking, and rising prices are putting a strain on household budgets. This makes people worry about consumer spending, the main thing that keeps the US economy going.

The most recent report showed that US inflation have gone up 7.1% over the past year. This is much faster than the healthy rate of 2%.

Analysts said the future is still being determined because of the strong job market. However, if the Federal Reserve wants to keep inflation in check, it may need to raise interest rates.

“As long as the job market is this tight, the Fed can’t be sure that inflation will go back to its target of 2%,” said Ronald Temple, chief market strategist at Lazard.

Read Also: Recession: World Bank releases global forecast 

The Labor Department said that the average hourly wage rose by 4.6% from December last year to December this year. Analysts said that was a good sign for the fight against inflation because it was slower than in November.

But it was a mixed bag for workers, whose pay raises have yet to keep up with rising US inflation.

“Workers’ pay isn’t keeping up with the rise in consumer prices. This can put a strain on family budgets. “It will be important to see how this equation plays out in the coming months, especially if inflation pressures ease,” said Mark Hamrick, a senior economic analyst at Bankrate.com.

Opinions expressed by Atlanta Wire contributors are their own.

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