World
Inflation In US Drops Slightly But Not Enough; Still At 40-Year High
Shoppers at a mall. (Representative image)
Inflation in the US has dropped, but it still remains at a four-decade high, defying exceptions of a bigger drop.
In April, consumer prices grew by 8.3 per cent annually.
This is lower from the 8.5 per cent spike in March.
This is the first time that the rate of inflation has dropped in eight months.
The moderation in overall inflation was driven by a drop in energy costs, which entails a 6.1 per cent drop in petrol prices.
According to analysts, inflation is still uncomfortably high and they believe that it will be hard to tame.
Why will it be hard to tame inflation?
Core CPI (CPI without the volatile gas and food prices) spiked from March to April.
Inflation in goods might be easing but surging prices in services (medical, rent, recreation) is becoming a concern. This is problematic as inflation in services cannot be solved by ameliorating supply chain disruptions.
Rent rose by 0.5 per cent for the third month. Rent accounts for one third of the overall Consumer Price Index.
The Bottom Line: According to multiple reports, a record share of Americans hold the view that inflation is the number one concern.
US President Biden blames external factors like the war in Europe and Covid-19. Republicans blame Biden's economic policies.
Some believe that the Federal Reserve misreading the situation and not hiking interest rates earlier is the main factor.
“At this point, I don’t care what the reasons are. Inflation is too high and my job is to get it down,” said Fed Governor Chris Waller.
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