Inflation, as measured by the producer price index, rose to 2.2% for the year ending in April, the Bureau of Economic Analysis reported Tuesday.
April marks the third straight rise in the headline inflation rate, the opposite of the trend sought by the Federal Reserve and a warning sign for President Joe Biden.The Fed has raised its interest rate target to 5.25% to 5.50%, the highest since the dot-com bubble at the turn of the century.
Recent inflation reports have come in hotter than anticipated, with the consumer price index rising to 3.5% in March. Because of the hotter inflation prints, coupled with the insulation of the strong jobs market, many investors began to expect that the Fed would hold off on cutting rates until after the November election. in April, versus 315,000 the month before, and the unemployment rate rose a tenth of a percentage point to 3.9%.
Additionally, the number of new applications for unemployment benefits rose by 22,000 to 231,000 last week, the highest number of jobless claims in about nine months. since February 2021. The job opening numbers fell below expectations, continuing a trend of slowly declining job openings over the past few years.A softening labor market could cause the Fed to cut sooner rather than later, but if inflation remains elevated, the situation will be difficult for the central bank.
Higher interest rates are bad news for President Joe Biden in an election year. Biden’s economic approval ratings have been hamstrung by high inflation coupled with the higher-interest-rate environment. Higher rates make things like buying a home or taking out a loan much more expensive for voters.
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