The sharp increase in interest rates has become the BNN world news and the defying high inflation has been a trend, and Americans believe that if this continues, the economy will be strong enough to avoid the impending recession. With the current high inflation, consumers do not expect anything, according to the pre-determined survey. Their confidence could lead to them controlling their spending habits and demanding higher wages, slowing inflation over time.
If this blend lasts for a long time, the Federal Reserve would be able to control inflation without needing to derail the economy. As inflation has slowed, the Fed can control rate hikes, making a recession less likely. Presently, the economy is in the middle phase, but it is not that hot or cold, especially for retail. Things are presently not in the boom phase, but they have not collapsed either.
The reason behind the peak inflation
After three years of the pandemic, there was a brief recession followed by a strong rebound. The economy appears to have entered a phase where growth may not be as significant as the high inflation of fuel. One reason is the consumer is trying to spend at a faster rate.
One New York City resident, Francisco Santana, always stocked up on groceries after the pandemic’s impact. The groceries must have cost a hundred dollars, consisting of hamburger buns, bacon, sugar, and cream cheese, which were among the necessities sufficient for the families of five members.
When asked about Santana’s spending habits, she says she is frugal. The increase in inflation has caused him to shift his grocery shopping from local chains to Walmart. Inflation may still be a huge concern, but he still prefers something within his budget and with quality. The Fed has been closely monitoring consumer surveys, which show that the two years of pandemic crises resulted in the worst inflation in four years. America’s inflation expectations for the future remain modest and are likely to be close to pre-pandemic levels.
People are not expecting low inflation since it can be self-perpetuating. This means that if inflation remains high, they will have good pay and even a demand for it. Businesses often charge customers to offset the high cost of labor, which increases inflation. As a result, increased inflation expectations due to a temporary disruption can result in a high price for oil during a supply crunch that can last for a long time. However, it is also believed that low inflation expectations can reverse the dynamics and slow the rising inflation.
What did the survey reveal?
A recent survey by the New York Federal Reserve Bank shows typical consumer inflation to have been 2.7% in the last three years, which has come down to 4.2% during the 2021 winter and was hardly high in January. It was quite below the present rate of inflation of 6.4%.
The public has made up its mind with BNN world news that inflation will keep coming back to 2%, but of course, it will take some time.