According to the Labor Department, U.S. Inflation reached 9.1 percent in June, its highest rate in nearly 41 years, reports The Wall Street Journal.
In addition to investor expectations of slowing economic growth leading to declining commodity prices, retailers have also warned of the need to discount items inconsistent with customer preferences, especially for apparel and home goods products. Economists expect these to mitigate price pressures over the next few months.
“There’s a pretty serious recession fear affecting a broad range of asset prices,” Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, told The Wall Street Journal.
Big name retailers like Target have indicated a plan for large discounts, which Rosner-Warburton said can test whether pricing is returning to pre-pandemic patterns.
“It would be really important if we do see discounting return, because it would show that we weren’t that far away from the pre-Covid environment in terms of pricing behavior,” she said.
In June, the Fed raised its interest rate target by 0.75 percent, the largest increase since 1994. The hope with this increase is that higher rates slow demand, thus restoring price stability; however, this action also increases the risk of recession.
The Fed also is trying to decrease consumer expectations of higher inflation taking hold of the economy, as these fears can lead to increased rates. Luckily, this seems to be the case, as consumer inflation expectations, measured by this week’s Federal Reserve Bank of New York survey, indicated Americans expect slower inflation increases over a longer period than they had in the past few months. Full Story (Subscription Required)
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