Inflation remains elevated despite a recent slowdown, with February prices rising 3.2% year-over-year. Gasoline, shelter, and services like sporting events and tax preparation saw significant increases. While real wages are improving, inflation has eroded purchasing power. Interest rates, used by the Federal Reserve to combat inflation, may not be cut soon, affecting borrowers with high-interest debt.
Consumers increasingly doubt the Federal Reserve can achieve its inflation goals anytime soon, according to a survey. This is because longer-term inflation expectations have risen, with the three-year outlook increasing to 2.7% and the five-year outlook jumping to 2.9%. This is well ahead of the Fed's 2% goal for 12-month inflation, indicating that the central bank may need to keep policy tighter for longer.
Inflation remains persistent, with key indicators above expectations. Core CPI rose 0.4% monthly and 3.8% annually, driven by energy and shelter costs. Despite some price declines, such as medical care, inflation remains above the Fed's 2% target. The Fed may delay lowering interest rates until it achieves greater confidence in inflation's decline. Strong job growth and consumer spending, while positive for the economy, also raise concerns about inflation's resilience.
