ST. LOUIS – The final Consumer Price Index before the midterm elections dropped on Thursday, and inflation numbers were worse than many economists expected.
“Prices went up by 8.2 percent on average, which is pretty high,” said economist Fernando Martin.
Martin is the assistant vice president at the Federal Reserve Bank of St. Louis.
“Consumption right now is high relative to the pre-pandemic trend, and you shouldn’t be surprised prices are high because demand is high,” he said.
Martin said the debate among economists is focused on peak inflation and when the labor market will weaken.
“Until those two things happen, I think we’re still going to see aggressive monetary policy. At some point, reevaluation will have to be made as to how you handle those two margins,” he said.
The Federal Reserve has raised interest rates five times this year to help bring inflation down. Many economists think more rate hikes are coming. Some fear going too far could potentially send the country into a recession.
“Right now, the labor market is pretty strong, so any signs of looming recession are still far off,” Martin said. “That’s why the Fed still has a lot of room to raise interest rates before you start seeing the hurt in the real economy.”
The Social Security Administration predicts that checks will be 8.7 percent larger in 2023 to compensate for higher prices. It’s the largest cost of living adjustment to benefits in four decades. It’s a much-needed relief for many who might not get it soon enough or be enough to make ends meet.