May 12, 2021–After months of speculation by economists and analysts about the potential for inflation in the United States, new government data shows the concerns were legitimate.
Inflation in April rose to 4.2 percent, up from 2.6 percent in March. Moreover, it is the largest 12-month increase since 2008.
It’s a sign that the U.S. spending spree in the midst of the global pandemic may be hitting a wall.
Further exacerbating problems are supply shortages in everything from labor to semiconductors to hot dogs.
Highest Rising Prices
The energy sector, in particular, draws attention as prices of oil and gas spiked. But even setting aside prices in food and energy, inflation nearly doubled, from 1.6 percent in March to 3 percent in April.
Consumers found the highest rising prices in the following areas, according to the Labor Department:
- used cars and trucks,
- shelter,
- airline fares,
- recreation,
- car insurance,
- and household furniture.
Exceeding Fed’s Target
The numbers are well above the Federal Reserve’s target of 2 percent. Fed policymakers, however, suggest the spike might be temporary. In a speech today to the National Association for Business Economics, Federal Reserve Vice Chair Richard Clarida said he expects inflation to return to 2 percent “or perhaps run somewhat above” it in 2022 and 2023. He reiterated the Fed’s December 2020 commitment to continue purchasing Treasury securities and mortgage-backed securities until it reaches “our maximum-employment and price-stability goals.”
The next data on inflation is due on June 10.
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