Annual U.S. inflation rose to 3.4 percent, driven by food and housing prices.

Shoppers in the Union Square area of ​​New York City on December 19, 2023. (Maansi Srivastava/The New York Times/File)

He rising rents and food prices promoted US headline inflation in Decembera sign that the campaign Federal Reserve contain inflation to target level 2% will continue to be difficult.

Thursday report work department showed that overall prices increased by 0.3% compared to November and 3.4% compared to 12 months earlier. The rise topped the previous monthly rise of 0.1% and annual inflation of 3.1% in November.

However, excluding volatile food and energy prices, so-called benchmark prices rose only once. 0.3% on a monthly basis, unchanged from November growth. Base prices increased by 3.9% compared with the previous year, down one-tenth from the 4% annual growth recorded in November. Economists pay special attention to core prices because, excluding costs that typically fluctuate from month to month, they are considered the best guide to the likely path of inflation.

General inflation has cools more or less constantly since reaching a four-decade high 9.1% However, the persistence of still-high inflation helps explain why, despite strong economic growth, low unemployment and healthy hiring, surveys show that many Americans are unhappy with the economylikely a key issue in the 2024 elections.

An independent hairdresser waits for clients in his van on the street of New York, USA, December 25, 2023. REUTERS/Eduardo Muñoz/File

The Federal Reserve, which began aggressively raising interest rates in March 2022 to try to slow the rate of price increases, wants to bring annual inflation down to target 2%.

Overall, progress in the fight against inflation has been significant. A year ago, the annual increase in the consumer price index was 6.5%which is well below the four-decade high 9.1% recorded in June 2022, but still painfully high. Additionally, wage growth has outpaced inflation in recent months, meaning Americans’ average wages have risen after inflation.

There are good reasons to be optimistic that inflation pressures will continue to ease in the coming months.

For example, this week the Federal Reserve Bank of New York reported that consumers now expect inflation to be only 3% For next year, this is the lowest annual forecast since January 2021. This is important because consumers’ own expectations are considered a strong indicator of future inflation: when Americans fear prices will continue to rise, they tend to They rush to buy things sooner rather than later. This wave of spending tends to fuel inflation..

But this nasty cycle doesn’t seem to happen.

A man walks past the Federal Reserve Bank of New York in New York, USA, March 13, 2023. REUTERS/Brendan McDermid/File

And when Federal Reserve officials discussed the outlook for inflation at their last meeting last month, they saw some encouraging signs: delays at the end of the supply chain this caused shortages of spare parts and inflationary pressure, as well reduction in rental costswhich begins to spread throughout the economy.

Many economists believe that curbing inflation 9% around 3% it was easier to achieve than it might have been to achieve the goal 2% Federal Reserve System.

A job vacancy sign outside Starbucks in Manhattan, New York, USA. May 26, 2021 REUTERS/Andrew Kelly/File

The December US jobs report released last week contained some cautious news for the Federal Reserve: Average hourly wages rose by 4.1% compared to last year, slightly higher 4% November. AND 676,000 people have left the labor force, reducing the share of adults who are employed or looking for work at the same time. 62.5%lowest level since February.

This is potentially concerning because when fewer people are looking for work, it often becomes more difficult for employers to fill jobs. As a result, they may be forced Dramatically increase wages to attract job seekers and then influence increasing labor costs for your customers through higher prices. It’s a cycle that can perpetuate inflation.

(according to AP)

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