The nonpartisan agency expects the consumer price index to rise 6.1% this year and 3.1% in 2023, above a long-term baseline of 2.3%.
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Federal Reserve officials agreed when they met earlier this month that they may have to raise interest rates to levels that would weaken the economy as part of their drive to curb inflation, which is near a four-decade high.
While broad support for U.S. sanctions has not faltered, the balance of opinion on prioritizing sanctions over the economy has shifted, according to the poll from The Associated Press-NORC Center for Public Affairs Research.
Although major swaths of the economy—including the job market and consumer spending—remain robust, there are mounting worries that rising borrowing costs for consumers and businesses, after years of near-zero interest rates, could cause a sudden retrenchment.
American workers are enjoying historically strong job security two years after the coronavirus pandemic plunged the economy into a short but devastating recession.
Consumers are providing critical support to the economy even after a year of seeing prices spiral higher for gas, food, rent, and other necessities.
Still, Wednesday’s report contained some cautionary signs that inflation may be becoming more entrenched. Excluding the volatile food and energy categories, so-called core prices jumped 0.6% from March to April—twice the 0.3% rise from February to March.
Food banks across America say negative economic conditions are intensifying demand for their support at a time when their labor and distribution costs are climbing and donations are slowing.
The observations came in the Federal Reserve’s semiannual Financial Stability Report that looks at trends in trading and investing as well as broad economic issues.
Rising inflation that has caused the biggest jump in prices in 40 years has spurred the Federal Reserve to aggressively raise interest rates, which increases demand for U.S. dollars.
Economists and investors foresee the fastest pace of Federal Reserve rate increases since 1989. The result could be much higher borrowing costs for households well into the future.
Employers posted 11.5 million job openings in March, more evidence of a tight labor market that has emboldened millions of American workers to seek better paying jobs and contributed to the biggest surge in inflation in four decades.
Yet, there were signs in Friday’s report from the Commerce Department that inflation might be slowing from its galloping pace and perhaps nearing a peak, at least for now.
Treasury Secretary Janet Yellen said Thursday in an address at the Brookings Institution that countries need to build in “recession remedies” to protect people in the U.S. and globally going forward.
The economy’s overall decline in the January-March quarter does not mean a recession is likely in the coming months. Most economists expect a rebound this quarter as solid hiring and wage gains sustain growth.
U.S. consumer confidence dampened slightly in April but remains high even as inflation continues to cloud optimism about the rest of the year.
As the Federal Reserve sees it, the surge in job postings forces employers to boost wages to attract and keep workers. Those higher labor costs are then passed to customers in the form of higher prices, thereby helping fuel inflation.
Soaring prices on everything, particularly at the gas pump, are now making shoppers choosier about how they spend their money.