A New York Fed survey shows that most U.S. households think the high inflation environment will not fade over the next 12 months.
– the personal consumption expenditures price index – continued to run hot in April, according to new data released on Friday by the Bureau of Economic Analysis. Core prices, which exclude the more volatile measurements of food and energy, soared 4.9% in the year through April. Including food and energy, prices jumped 6.3%.
In response, the Federal Reserve has taken a significantly more hawkish approach to fighting inflation: After hiking the key interest rate by a quarter-percentage point in March, policymakers this month approved an even steeper, half-percentage point increase. They have signaled that similarly sized increases are on the table at coming meetings.
The biggest question now is whether central bank officials can successfully tame inflation and stabilize prices. Raising the federal funds rate tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.
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