The Federal Reserve’s preferred inflation indicator accelerated in August, keeping the pressure on economic policymakers at a time when many are watching with suspicion that supply chain problems and commodity costs threaten to keep prices going. price increases longer than expected.
The personal consumption expenditure index rose 4.3% in the year to August, up from 4.2% in July and the fastest rate of increase since 1991. The monthly index is also remained high, increasing 0.4% for a second consecutive month.
The data comes as economists gaze apprehensively on the horizon. Plant closures in Asia continue to impact the global supply chain. The costs of commodities, including oil and gas, are rising. Rents are rebounding at a breakneck pace after a pandemic swoon, threatening to push housing inflation – a major part of the overall price index – up.
Fed officials are monitoring these trends themselves, and while they say they still expect inflation to come down, they recognize that the process is taking longer than expected. or hoped for.
It is “frustrating to see bottlenecks and supply chain problems not improving – in fact, at the margin, apparently getting a little worse,” said Jerome H. Powell, president of the Fed, at a conference Wednesday. “We see this probably continuing next year and maintaining inflation longer than we expected.”
Inflation and supply issues also pose a headache for President Biden’s White House, as rising costs eat away at voters’ paychecks and homes and cars prove significantly more expensive and difficult to afford. to buy.
Republicans blamed the price hike on government spending. The acceleration is due in part to the fact that supply has not been able to adjust quickly enough to meet the demand that huge amounts of pandemic-era stimulus have helped unleash.
They also use inflation to bludgeon the administration’s plans for additional spending.
Bryan Steil, a Republican representative from Wisconsin, asked Treasury Secretary Janet Yellen about how spending and the trajectory of debt might affect inflation going forward at a hearing Thursday. He also asked Mr. Powell, who was testifying alongside Ms. Yellen, about the Fed’s plan to deal with rapid price hikes.
“Regardless of what the White House press team says, I think people are really seeing the impact of rising prices day in and day out,” Mr. Steil said, later suggesting that “spending Uncontrolled ”in Washington would raise consumer inflation expectations.
Friday’s PCE data is in line with figures from the Consumer Price Index, a separate inflation index. This ratio also jumped sharply in 2021, reaching 5.3% in the year through August.