News and Commentary

Inflation Worries Remain Near Record Highs, Boding Poorly For Economy

   DailyWire.com
Omicron's Continued Spread And Supply Chain Disruptions Add To Low Inventory On Store Shelves MIAMI, FLORIDA - JANUARY 11: Shelves displaying meat are partially empty as shoppers makes their way through a supermarket on January 11, 2022 in Miami, Florida. The coronavirus Omicron variant is still disrupting the supply chain causing some empty shelves at stores. (Photo by Joe Raedle/Getty Images) Joe Raedle / Staff
Photo by Joe Raedle/Staff/Getty Images

Americans continue to be deeply worried about inflation and expect higher price levels in the long run, according to a survey from the Federal Reserve Bank of New York released Monday.

The April 2022 Survey of Consumer Expectations revealed that inflation expectations at the one-year horizon fell from 6.6% to 6.3% in March, even as three-year horizon expectations rose from 3.7% to 3.9%. Both data series remain near their highs.

Meanwhile, expectations for gas price increases over the next year fell from 9.6% to 5.2%. Americans expect 9.4% increases in food prices, 9.5% increases in medical care prices, 10.3% increases in rent prices, and 9.1% increases in the cost of college education.

The survey was released as the key University of Michigan’s Consumer Sentiment Index continues to plummet. According to University of Florida economist Hector Sandoval, inflation plays a major role in Americans households’ worries — thereby threatening to slow economic activity.

“Currently, spending intentions have been trending downward over the last few months as inflation has risen consistently, reaching record levels and prompting the Fed to increase interest rates in the short run,” Sandoval said in response to sentiment among Florida consumers dropping 4.4% in April.

Indeed, the Federal Reserve increased interest rates by a half point last week to curb rising price levels — marking the largest rate hike since May 2000 and following a quarter point increase from near-zero levels two months ago.

“Inflation is much too high,” Fed Chairman Jerome Powell said at a news conference. “We understand the hardship it is causing, and we’re moving expeditiously to bring it back down. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses.”

The rise in prices has outpaced nominal increases in pay, producing a nearly 3% decline in real wages — stretching Americans’ budgets with respect to food, gas, housing, and other necessities. A recent poll found that 94% of Americans were either “upset” or “concerned” about the impact of skyrocketing inflation, while a slim 28% approved of President Joe Biden’s approach toward managing price levels.

Along with everyday consumers, experts predict that inflation will continue to torment the United States economy.

“Inflation, as we all know, when it gets in the system, it’s very hard to get it out,” billionaire investor David Rubenstein said on Fox News. “It takes a long time to get it out, can take a couple of years.”

“So now I don’t think the inflation rate this year will be what it was last month or so. I don’t think we’re going to have 8% annualized rate of inflation, but I suspect something around 5% is probably not unlikely, maybe even 6%,” he added.

Milken Institute Chief Economist Bill Lee agreed, saying inflation would be “well over 3.5%” for the next five years.

“One of the things that we’ve seen is that inflation has, you know, very direct impacts on Americans, on American families and American businesses,” Director of the Congressional Budget Office Phillip Swagel told Fox News Digital. “It also has implications… for the budget. For American families, the high inflation that we’ve seen the highest in decades has meant higher prices for food, for travel, for gasoline. It means that family incomes don’t go as far. Family budgets are stretched.”