Some Fed officials are concerned that core inflation hasn’t declined much since reaching 4.7% in July.
Friday’s inflation figures point to the dilemma confronting officials at the Federal Reserve: Across the economy, price increases for many goods have slowed significantly. And some previous drivers of inflation, notably clogged supply chains, have eased. Yet prices for many services, including restaurants, auto insurance and hotel rooms, are still surging, fueled by robust demand from consumers who in many cases have enjoyed rising wages.
There is growing evidence that the Fed’s efforts to slow consumer spending and economic growth are succeeding. The government’s figures Friday on consumer spending suggested that consumers have grown more cautious since the start of the year, when spending had jumped 2% just in January. The spending surge that month was fueled by a nearly 9% jump in Social Security and other benefit payments that are intended to keep pace with inflation.
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