the price of gas has risen to a national average of $4.33 per gallon, and exceeded seven dollars in parts of California. Higher energy costs act like a tax on the economy, depressing the level of demand for other goods and services.
They also contribute to an over-all increase in consumer-price inflation, which is already at its highest rate in forty years: 7.9 per cent in February. The surge in gasoline prices that we’ve seen since the start of the conflict in Ukraine could well lift the March inflation rate to more than eight per cent.
At a scheduled policy meeting this week, they are set to raise the federal funds rate—for the first time since 2018—from zero to 0.25 per cent
Historically, a 0.25-per-cent funds rate would still be very low, but Wall Street is expecting as many as six further rate hikes in 2022
As the federal funds rate rises, other interest rates in the economy will likely go up, too, including those for home mortgages and auto loans.
Looking further ahead, Shepherdson wrote, the key factor in determining the path of inflation will be what happens in the labor market. If wage gains are moderate and worker productivity increases, businesses will have less incentive to raise prices, and there will be less danger of a wage-price spiral
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