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Forefront Friday – Inflation and Interest Rates
Inflation rose to a 7.9% annual rate in February. It’s the highest it’s been in 40 years. Higher prices for energy, groceries and eating out at restaurants helped push up that inflationary reading. Economists also expect further price increases associated with the war in Ukraine. Oil prices hit their highest levels since 2008, and in March, gas prices reached record highs. Strong demand for consumer goods and supply chain constraints helped contribute to the inflationary numbers.
A tight labor market has also pushed wages higher. There are more job openings than individuals who are looking for jobs in an effort to reduce the demand in the economy. The Federal Reserve increased interest rates for the first time since 2018 and penciled in six more rate increases for the year. Time will tell if the Fed’s recent interest rate hike will curb inflation or if higher prices will persist with increased cost for businesses and consumers.