The United States may be facing an impending recession according to recently-released inflation figures as efforts by the Federal Reserve to halt inflation have seen only limited success.
The Labor Department said Wednesday that inflation for the price of common goods has remained hot. The Consumer Price Index (CPI) rose 5% year-over-year.
Making matters worse was that for the first time, “core” inflation, meaning inflation minus the cost of food and energy was higher than the overall rate of inflation.
The 5.6% core inflation rate outpaced the overall average on both the monthly and annual bases. In fact, the core inflation rate was four times higher month-over-month at 0.4% compared to the overall 0.1% for all CPI inflation.
Energy and housing costs were two of the major factors leading to the high inflation report. Gas prices have recently risen and oil is currently above $80 a barrel. Biden administration restrictions on oil and natural gas drilling are likely helping to push prices at the pump higher.
Food prices are 8.4% higher than a year ago, while housing prices are more than 8% higher than this time last year.
Furthermore, the consistent inflation situation will continue wiping out any wage gains made by the average American.
Fox Business Panel: Wages are still being wiped out by almost two years of extremely high inflation pic.twitter.com/VLwda6bwuz
— RNC Research (@RNCResearch) April 7, 2023
The difficult economic situation may become worse due to the situation at the Fed. According to former Reagan White House economic adviser Art Laffer, the Federal Reserve has acquired billions in assets, limiting its ability to react to economic stresses.
The wave of bank failures earlier this year is another sign of the difficult position the Federal Reserve is in. If it continues to raise rates to slow inflation, it could cause a new wave of bank failures or even a recession.
Should the Fed leave rates at current levels, inflation will likely continue to rise, especially under the pressure of higher fuel prices.
The Fed has increased rates by 4.75%, which is the sharpest tightening in 40 years. While the Biden administration originally dismissed increased inflation as transitory, it has now continued for more than two years.