The Personal Consumption Expenditures Price Index — the Federal Reserve’s preferred metric for tracking inflation — is rising at a 6.4% year-over-year rate as of February.
The increase surpasses the 6.1% rate charted in January, marking the highest inflation rate since 1982. Without considering volatile categories like food and fuel, the PCEPI climbed 5.4% year-over-year.
Rising price levels have been a major criticism of President Joe Biden’s first year in office, with 83% of Americans responding affirmatively to a poll asking whether “increased prices of everyday items caused you or your household any hardship” over the past month.
Likewise, voters were also asked about the recent surge in gas prices. 39% blamed the trend on the Biden administration; 21% blamed gas and oil sanctions placed by the Biden administration and Western allies on Russia; 18% blamed oil and gas companies; and 8.5% blamed COVID-19.
Last month, the Federal Reserve — which is charged with manipulating the money supply to target stable inflation and maximum employment — raised interest rates for the first time since December 2018. The 0.25% bump from near-zero levels is an attempt to tap the brakes on inflation; indeed, the Fed is predicting six more rate increases in 2022, three in 2023, and zero in 2024.
“Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially,” the central bank’s Federal Open Market Committee explained in a statement. “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”
“The Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate,” the statement continued. “In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.”
As The Daily Wire’s Cabot Phillips explained on a recent episode of Morning Wire, the rate hike will have ripple effects throughout the economy.
“The general idea is that as interest rates go up, average people are less likely to take out loans because the deals aren’t as good as they’ve been,” he explained. “As that happens, the idea is that people will stop borrowing and spending money, which will leave fewer active dollars in the economy … hopefully curbing inflation.”
“For anyone taking out larger loans, they are gonna notice this,” Phillips continued. “If you have an existing car loan or federal student loan, those won’t be affected, because they’re fixed rates, but others will.”
Meanwhile, the Consumer Price Index increased by 7.9% over the 12 months ending in February — hitting another 40-year high. In response to rising prices for gasoline and other staples, some governors are suggesting amendments to various state taxes.
“As Americans see their cost-of-living skyrocket amid historic inflation, suspending the grocery tax is the most effective way to provide direct relief to every Tennessean,” Governor Bill Lee (R-TN) said in a statement proposing a pause to the state’s grocery tax. “Our state has the ability to put dollars back in the pockets of hardworking Tennesseans, and I thank members of the General Assembly for their continued partnership in maintaining our fiscally conservative approach.”