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The US' booming recovery is fueling inflation: here's where you might be feeling it

Jerome has spoken... and investors didn't clap. Last week, the Fed indicated it expects to raise rates by the end of 2023, sooner than previously projected. The central bank has been pumping $$$ into the economy to keep rates low. Now, investors worry that could end sooner than expected. Higher interest rates can make bonds and savings accounts more attractive compared to riskier assets, like stocks. They also increase borrowing costs (think: credit card interest).

Should be an Uber Limo... for the price of that Uber X. The Fed can raise interest rates to slow inflation. ICYMI: things have been pretty #flated recently. Consumer prices jumped 5% in May from last year, the fastest pace since 2008. Here's where you might be feeling the bump:

  • Gas: The pump anxiety is real. Gas prices are up a whopping 56% since last May.
  • Cars: Consider the bus. Used car prices are up 30%, and insurance is up 17%.
  • Flights: Your Miami getaway ticket is looking like a roundtrip to Europe — +24%.
  • Laundry: Grab the quarters. Washing machine and dryer prices = +26%.
  • Ride-hail: When the Uber/Lyft surge pricing seems endless. Transportation services = +11%.
  • Food & Bev: Restaurant food (+4%), alcohol (+1.6%), cereal and baked goods (0.6%). Peanut butter has been a victim of price hikes, too.

THE TAKEAWAY

The US' recovery has global implications... That's because the US economy accounts for nearly 25% of the world's economic output. America's booming recovery is starting to drive up inflation around the globe. That's pushed some central banks in other countries to raise interest rates early — while many developing economies are still struggling as Covid surges. Looking ahead, continued inflation in the US could slow the global recovery. Investors hope it's just a one-time increase as the economy rebounds. But some worry inflation could last longer and weigh on markets.

 

 

 

 

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