The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. Consumer price inflation stood at 4.7% in 2021 and, according to GlobalData, it is estimated to reach 7% in 2022. Consumer prices rose 9.1% during the year ended June 2022, the highest rate in more than 40 years. The inflation increased significantly due to increase in the prices of gasoline, shelter, and food in comparison to that in the earlier years.
In June 2022, the indexes for clothing, home furnishings and operations, motor vehicle repair, and recreation also increased. In its most aggressive effort to control the runaway inflation in more than three decades, the US Federal Reserve increased its benchmark interest rate by three-quarters of a percent for the second consecutive time.
The interest rate in the US reached 1.68% in July 2022. The federal funds’ effective rate in the US was reduced significantly during February–April 2020. The COVID-19 pandemic also was a factor in rate reduction, as the Federal Reserve decided to use quantitative easing during the pandemic. To lower the rising inflation, the central bank will increase rates as necessary. From less than 2%, in around two years, the cost of living shot up to a yearly rate of 9.1% in June.
The Fed increases borrowing costs, making mortgage, vehicle, or business loans more expensive. As a result, consumers and businesses are likely to borrow less money and spend less, which will limit the rate of inflation.
The unemployment rate in the US was 5.4% in 2021 and, according to GlobalData, it is estimated to decrease to 4.3% in 2022. In June 2022, the unemployment rate remained at 3.6% for the fourth consecutive month, and there were 5.9 million unemployed people, almost unchanged from that in May. The economy is closer to recovering all the jobs lost during the pandemic mainly due to higher-than-expected employment gains.
Access the monthly tracker here: United States: Inflation, Interest Rate, and Unemployment Rate Monthly Tracker (2019 - YTD)
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