Staff Reports
Inflation has kept on climbing, reaching 3.4% for the year ending in December, and this is bad news for President Joe Biden and the Federal Reserve. The Bureau of Labor Statistics shared this data on Thursday, and it’s not exactly music to Biden’s ears. The White House has been bragging about reports that inflation is dropping, along with the country’s strong job market, as part of their “Bidenomics” plan. But it looks like they may need to rethink that strategy in light of this new info.
And it’s not just the White House feeling the heat. The Fed has been working hard to bring down inflation since March 2022, hiking interest rates left and right as part of their historic tightening cycle. But this increase in inflation might make things awkward for the central bank as they try to figure out their next move. Will they really start cutting soon? This news could be causing some anxiety among investors, that’s for sure.
Inflation is not gone. The fed made a major blunder in their announcement that rates would be cut in 2024. Look for a rate hike instead
Inflation rate ticked up to 3.4% in December as Fed eyes pivot https://t.co/EXkQchvzgh via @dcexaminer
— Steve A (@SteveV35B) January 11, 2024
On a month-to-month basis, inflation rose even higher than expected, reaching a whopping 0.3%. Yikes!
But wait, there’s more bad news for Biden and the Fed. “Core inflation,” which leaves out the wacky prices of food and energy, dropped a tad to 3.9% for the year ending in December. Sure, it’s gone down a bit over the past year, but it’s still higher than the Fed’s 2% target. Not exactly ideal.
Inflation has been going haywire because of all sorts of reasons, both on the supply and demand sides of things. Republicans are pointing fingers at the big wad of money the government spent during the pandemic, along with super-low interest rates. Meanwhile, Democrats are saying it’s all about those pesky supply-chain issues and pointing out that inflation has shot up in lots of other Western countries, not just the U.S.
The chief economist at FWDBONDS, Chris Rupkey, says, “Net, net, inflation at its core remains hotter than Fed officials would like to see.” And he’s not exactly predicting a smooth ride ahead. In fact, the Fed is thinking about three rate cuts this year, but investors are betting on a whopping six cuts in 2024. That’s a lot of cuts!
But there might be a glimmer of hope on the horizon. The Fed is hoping to pull off a “soft landing,” where inflation cools down to a more normal level without the economy tanking. Despite the almost two years of higher rates, the job market has been surprisingly strong, adding 216,000 jobs just in December. And the cherry on top? The unemployment rate is sitting at 3.7%—pretty darn low when you look at it historically. Let’s see how things play out, but it looks like Biden and the Fed might have a bumpy road ahead.
