At the national level, the price of a gallon of conventional gas reached a record $ 4.40, according to AAAalthough this figure is not adjusted for inflation. The main factor is the high cost of oil. A barrel of U.S. reference crude on Tuesday sold for about $ 100 a barrel. In April, gas fell to about $ 4.10 a gallon after reaching $ 4.32 in March.
In addition to financial tensions for households, inflation poses a serious political problem for President Joe Biden and Democrats in Congress during the midterm elections, and Republicans say Biden’s $ 1.9 trillion financial support package overheated the economy last March, filling the economy its incentive checks, reinforced unemployment benefits and child tax credit payments.
On Tuesday, Biden tried to take the initiative and declared inflation “the number one problem facing families today” and “my top domestic priority.”
Biden blamed chronic fuel disruptions in supply chains linked to the rapid economic recovery after the pandemic, as well as Russia’s invasion of Ukraine. He said his administration would help ease price increases by reducing the state budget deficit and encouraging competition in areas such as meat processing, which is dominated by several giants.
However, new failures abroad or other unforeseen problems can always bring inflation back to new highs in the US. If the European Union decides, for example, to cut off Russian oil, gas prices in the United States are likely to accelerate. Blocking Covid in China exacerbates supply problems and hurts the growth of the world’s second-largest economy.
Previous signs that inflation in the US may peak are not continuing. Price growth slowed in August and September last year, suggesting that the rise in inflation may be temporary, as many economists – and officials of the Federal Reserve – believe. But in October, prices rose again, forcing Fed Chairman Jerome Powell to start changing policies toward higher rates.
This time, however, several factors point to a peak in inflation. Natural gas prices, which rose in March after Russia’s invasion of Ukraine, fell on average in April and likely slowed inflation. Prices for used cars are also expected to fall last month. The supply chains of automakers have become a bit more complicated, sales of new cars have increased.
Although food and energy have experienced the most severe price spikes in the past year, analysts often track the key figure to get an idea of core inflation. Core inflation also tends to grow more slowly than overall price growth, and may take longer to decline. Rents, for example, are growing at a historically rapid rate, and there are few signs that this trend will change any time soon.
Unexpected persistence of high inflation has forced the Fed to embark on what could be the fastest series of rising interest rates in 33 years. Last week, the Fed raised its base short-term rate by half a point, the sharpest rise in two decades. And Powell has signaled that such drastic rate hikes will be even greater.
Powell’s Fed is committed to fulfilling the certainly difficult – and risky – task of cooling the economy enough to slow inflation without causing a recession. Economists say such an outcome is possible, but unlikely with such high inflation.
Meanwhile, by some measures, Americans’ wages are growing at the fastest pace in 20 years. Their higher pay allows more people to at least partially keep up with higher prices. But employers typically respond by charging customers more to cover their high labor costs, which in turn increases inflationary pressures.
The report on jobs last Friday in April included hourly wage data showing a slowdown in wage growth, which, if continued, could help ease inflation this year.