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Jill On Money: Slow progress on inflation

Jill Schlesinger on

The progress on inflation has been frustratingly slow this year.

The most recent evidence was found in the Consumer Price Index (CPI), which increased by 3.4 percent from a year ago in April, from 3.5% in March.

The Core rate, which removes food and energy, was up 3.6% from a year ago, from 3.8% in the prior month.

Although those changes do not seem that big, a tenth here, two-tenths there, can add up to movement in the right direction. In fact, annual core CPI has fallen to the lowest level since April 2021.

These numbers come on the heels of two, distinct periods:

(1) The decade prior to the pandemic, when prices were stable and the inflation rate hovered at just below 2%.

 

(2) The pandemic price surge, which started in 2021 and peaked in mid-2022. In the subsequent year, pandemic supply chain issues and the jump in energy prices associated with the war in Ukraine were resolved – and those “transitory” factors, combined with the impact of higher interest rates, pushed down the inflation rate.

But since last summer, inflation has been range-bound at 3 to 3.7%, higher than both consumers and the Federal Reserve would like to see.

One of the driving factors in keeping inflation high is the cost of housing.

Shelter is not only a big line item for household budgets, it is a major contributor to inflation — accounting for a third of overall CPI.

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