Staff Reports
In a shocking turn of events, inflation has surged to 3.2% for the year ending in February, according to the Bureau of Labor Statistics. This unwelcome spike in inflation could throw a major wrench into the Federal Reserve’s plans to cut interest rates in the coming months. And who does this bad news fall upon? None other than President Joe Biden, who was boasting about the decline in inflation just after his State of the Union address. Talk about bad timing, right?
Inflation unexpectedly rose to 3.2% in February in setback for Fed rate cut planshttps://t.co/aPCetpOibf
— Washington Examiner (@dcexaminer) March 12, 2024
The Fed has been working tirelessly for the past two years to combat inflation by hiking up interest rates. But with this sudden rise, the timing of when they’ll start cutting rates has become less certain. On a month-to-month basis, inflation jumped by 0.4%, right in line with projections. And if that’s not enough, “core inflation,” which excludes the wild swings of food and energy prices, fell a tenth of a percentage point to 3.8% for the year ending in February. Sure, it’s lower, but it’s still higher than what the Fed prefers at 2%.
Not only that, but annual inflation hit a whopping 9% in June 2022 before dropping to the current level. While it’s lower than before, it’s still running much higher than what the Fed would like. And who’s to blame for this mess? Well, according to those on the right side of the aisle, it’s all those stimulus checks and the super low interest rates. They say it’s caused by out-of-control spending during the pandemic. Meanwhile, the lefties point fingers at supply chain issues. It’s the same story of “he said, she said.”
But wait, there’s a glimmer of hope! There’s talk about the Fed possibly pulling off a “soft landing,” where inflation tumbles down to a healthier level without crashing the entire economy. The Fed had plans for three rate cuts this year, but now some folks are betting they might go even further. The odds of when the Fed will switch to cutting rates have shifted quite a bit in just a few months. It seemed like the first cut was coming in March, but now it looks like it might be delayed until June or July.
Why the rush for rate cuts, you ask? Well, they tend to give the stock market a boost. And despite the high interest rates, the S&P 500 has hit all-time record highs recently. The job market also provides some wiggle room for the Fed to tackle inflation. In February, it exceeded expectations by adding 275,000 jobs, but the unemployment rate ticked up slightly to 3.9%. Still, that’s pretty low by historical standards.
And to top it all off, President Biden has been patting himself on the back, boasting about the job growth during his time in office. He credits himself for turning the economy around from the brink of collapse to being the envy of the world. But, as they always say, the devil’s in the details!
So, what do you think about all this back-and-forth between the Fed and inflation? Let us know in the comments below, and don’t forget to hit that like button if you’re worried about the state of the economy!
