Federal Reserve Stuck After Inflation Jumped in December

Checking price of item in supermarket aisle

(VitalNews.org) – In a report from the Bureau of Labor Statistics on Thursday, it showed that consumer prices rose 3.4% in December. This has put a huge halt on the Federal Reserve’s plan to cut interest rates.

Interest rate cuts would be a benefit for payments on borrowed money like credit cards and mortgages, however, there is a risk of driving up inflation as a result. Economists didn’t expect the prices to shoot up as high as they did last month, which made them reconsider their plans of cutting interest rates.

The Federal Reserve has recently stated that they are looking for a 2% inflation before being able to tackle the interest rate issue. Price increases last month are seen mostly in larger investments like mortgages, housing costs, and energy costs. However, some food prices are even higher than inflation pricing would be. For example, the price of beef rose 9% in just the month of December and the price of crackers rose 8% during December as well.

Core inflation, which is inflation measurements that leave out the food and energy prices, climbed to 3.9% in December, which is a bit less than the previous month.

The Federal Reserve is looking to achieve what they call a “soft landing”, which would mean that price increases return to normal while the economy grows. The recent economic performance might put a damper on these plans as the Federal Reserve tries to get the economy under control.

Inflation is well below the 9% rate it was last year, but it’s still not at the 2% that the Federal Reserve is looking for. The Fed is worried about an additional heightening of economic activity as that could raise prices and demand once again.

Federal Reserve chairman Jerome Powell spoke out about the changes. Powell said, “Inflation has eased from its highs and this has come without the significant increase in unemployment. That’s very good news.”

Some market observers are expecting a cut in interest rates during the Fed meeting that will occur in March, however, others say that those who are expecting that might be “in for a disappointment” as the economic trends show that might not necessarily happen.

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