One Of Those Has Fallen, The Other Never Will | Global News Avenue

The country’s top banker acknowledges an economic reality that defines the financial life of every household in the country: Inflation may have slowed from its peak in 2022, but the cost of living will only continue to rise.

Federal Reserve Chairman Jerome Powell, the government official responsible for controlling inflation, made the comments on Wednesday. in an event Hosted by new york times. Powell was asked why the public was dissatisfied with the economy even though official statistics showed it was doing pretty well by historical standards.

Powell highlighted the difference between the two inflation and cost of living. Inflation is the rate at which the prices of everyday items change. Zero inflation means prices remain exactly the same. (The Fed targets inflation at 2% annually.)

“People are not satisfied because the price level is higher,” Powell said. “You can tell people that inflation has gone down and that’s what’s happening in prices. But that’s not the case for people who are paying 10, 20 percent more for the important things in life. It doesn’t matter to people.”

What’s the difference?

In fact, by 2022, inflation has stabilized from a four-decade high of 9.1%. But prices for most commodities continue to rise, albeit at a slower pace than before. That makes central bankers happy, but ordinary people less so.

The consumer price index, which measures the price of nearly everything people need to live, has risen 21.7% since the outbreak began.

Individual projects have seen larger increases. Eggs are 68% more expensive than in February 2020. Auto insurance rose 51% during the same period.

“The bottom line is that the Fed’s preferred inflation measure, year-over-year inflation, is likely to be back near 2%, but the cost of living for households is still significantly higher than it was four years ago,” Torsten Slok chief economist at Apollo, in a commentary wrote.

Prices will not return to their original levels

The post-pandemic burst of inflation continues to impact household budgets years after it receded, and it’s also affecting politics: Voter outrage over inflation At least one survey suggests that helped Democrats lose power in the federal government in November’s election.

Even if inflation subsides, these prices are likely to remain high. The Fed’s goal is to keep prices rising slowly, Don’t fallbecause widespread and sustained price declines typically occur only during times of extreme economic distress, such as the Great Depression.