From housing to energy to food, US inflation picks up, though some costs rise only mildly

(continued from Page 3) “Our grocery bill has doubled,” said Megan Cherry, a psychologist who lives with her husband and children in Temple Terrace, Florida. “We’ve got to change how much we get of each thing. Our kids noticed recently that, ‘Wow, we eat a lot of chicken.’ Well, because we can afford chicken.”

Thursday’s figures reflected the outsize role that housing plays in the U.S. consumer price index — roughly a third of the index. A measure of homeownership alone makes up about 25% of CPI. The government measures homeownership costs by calculating how much rent a homeowner would likely charge if that home were being rented, a figure seen as equivalent to the cost of owning the property. Overall housing prices rose 0.5% from November to December. Rents were up 0.4%, homeownership 0.5%.

Over the past year, consumers have enjoyed price declines for some individual items. Furniture and bedding prices are down 4%, for example. Men’s suits and coats are 6% lower, televisions 10%, sporting goods nearly 3%, sausages nearly 4%.

The Fed, which began aggressively raising interest rates in March 2022 to try to slow the pace of price increases, wants to reduce year-over-year inflation to its 2% target level. And there are solid reasons for optimism that inflationary pressure will continue to recede in the coming months.

The Federal Reserve Bank of New York reported this week, for example, that consumers now expect inflation to come in at just 3% over the next year, the lowest one-year forecast since January 2021. That’s important because consumer expectations are themselves considered a telltale sign of future inflation: When Americans fear that prices will keep accelerating, they will typically rush to buy things sooner rather than later. That surge of spending tends to fuel more inflation.

But that nasty cycle does not appear to be happening. And when Fed officials discussed the inflation outlook at their most recent meeting last month, they noted some hopeful signs: In particular, they noted an end to the supply chain backlogs that had caused parts shortages and inflation pressures.

Many economists have suggested that slowing inflation from 9% to around 3% was easier to achieve than reaching the Fed’s 2% target could prove to be.

“It just tells you the last mile is a struggle,’’ said Vincent Reinhart, chief economist at Dreyfus Mellon.

The Fed’s policymakers have signaled that they expect to cut interest rates three times this year. Financial markets rallied in anticipation of lower borrowing costs, and exuberant traders began predicting a rate cut as early as the Fed’s next meeting in March.

But Reinhart, a former top Fed economist, suggested that December’s slightly higher-than-expected inflation and the need for the central bank’s policymakers to agree on any changes in monetary policy will likely delay the first rate cut, probably until September. Small-business owners, in the meantime, are still adjusting to higher costs. Among them is Roberto Torres, president of Blind Tiger Coffee Roasters in Tampa, Florida. Torres used to charge $3.50 for a 12-ounce latte; it now costs $5. To save money, he’s buying supplies in bulk — a year’s worth at a time. And Scott Christian, owner of The Hochatown Saloon, which operates a live-music venue and restaurant in Broken Bow, Oklahoma, has had to raise menu prices by 20% three or four times in the past two years.

Though food inflation has cooled recently, Christian still faces pressure to raise pay to attract workers. The problem worsened recently when a casino opened in the area and has been competing for the same hourly workers.

“That’s the only thing we can do — go up on price,” he said.