The consumer price index for February was another indication that inflation in the US is out of control. Compared to the same month last year, prices rose by 7.9%, the largest annual increase since January 1982. One notable difference between the two periods is that the US was in recession at the time. There are fears that the current inflationary pressure could trigger a recession later this year.
According to a recent report from the Bureau of Labor Statistics, the prices of many household items have risen rapidly. Gas and energy prices were the most prominent, with fuel oil prices rising sharply. And those numbers come before March’s gasoline price hike, which pushed the price per gallon to its highest level in history. Thus, the March CPI could be even higher. (See states where gas prices are rising fastest.)
The cost of many products has also increased. The prices of new and used cars have jumped in double digits due to a shortage of chips, which in turn has led to a shortage of new cars that use them. This deficit is not expected to improve until the end of this year. In conclusion, the BLS experts wrote: “Increases in gasoline, housing and food indexes contributed the most to the increase in all seasonally adjusted items.”
Price spikes raise several policy questions. The first is the speed at which the Federal Reserve is raising rates to dampen price increases. It looks like the Fed will raise rates by half a percentage point this month, with three more hikes expected this year. However, as inflation accelerates, there will be debate over whether these rates should be raised more frequently in 2022, or in larger increments – perhaps up to 1% at any given time.
Some experts believe that inflation is already behind us. Paul Ashworth, chief economist at Capital Economics in the US, told The Wall Street Journal that he believes oil prices will soon decline and supply restrictions ease, and so “March should be the peak.” One of America’s most prominent economists and former treasury secretary disagrees. Larry Summers believes that inflation will be dangerous enough to cause a recession. (Inflation seems to have hit all walks of life. Here are 25 museums where ticket prices have risen the most.)
There is little reason to believe that oil prices will fall, given the current geopolitical conditions that have prompted a ban on Russian oil purchases. Car prices will almost certainly not be moderate. Supply chain issues that have added to the cost of several commodities do not appear to be resolved soon. And the prices of some meats and grains have been rising for more than a year, implying longer-term problems. February numbers may not be the worst this year.
24/7 Wall St. studied the recent release of the BLS consumer price index and listed household items that saw prices increase by more than 10% in February 2022 compared to February 2021.
Click here to see which household item’s price is skyrocketing