If you thought things cost more in April, you were right. Consumer prices went up the most since 2008 as demand for goods increased with the reopening of the U.S. economy. This boost in demand pushed against supply constraints, exacerbating financial market fears of a lengthy period of higher inflation.
A just-released consumer price index (CPI) report from the Labor Department illustrated a strong buildup of underlying price pressures — the highest since 2008. The result had been a prolonged stock selloff on Wall Street.
Nearly every industry was affected — higher demand than supply caused a record jump in prices of used cars and trucks, for example. There was a semiconductor chip shortage, which slowed automobile production.
Energy prices overall increased 25 percent from a year earlier, including a 49.6 percent increase for gasoline and 37.3 percent for fuel oil, CNBC reported.
Meanwhile, stocks on Wall Street dropped as investors feared that growing inflation could force the Federal Reserve to raise interest rates sooner than expected. If this happens, some worry inflation could pop the current speculative bubble.
But the Feds and some economists say Americans shouldn’t be so quick to worry.
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Treasury Secretary Janet Yellen said she doesn’t anticipate inflation to be an issue. At The Wall Street Journal’s CEO Council Summit, she said she had confidence that the U.S. economy and employment will return to normal by 2022, the Wall Street Journal reported.
“This is not a sign of an inflation problem,” Robert Barbera, director of Johns Hopkins University’s Center for Financial Economics, told Reuters. “We have the capacity to produce this stuff, we simply need time to get things back on line.”
“Basically, the economy was in crash mode last April and May so prices collapsed,” MarketWatch reported. “And now the economy is booming so you have an exaggerated base effect where the numbers look high in large part because we’re comparing it to a severely depressed environment. All that said, we’re going to get several more months of what looks like high-ish inflation since the base effect will persist for most of the summer.”
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