One Thing is Playing an Outsized Role in Driving Inflation, Says Fed Chair

03/14/2024 07:24 pm

WASHINGTON–The Federal Reserve’s chairman  said there is one rising cost that is playing an outsized role in inflation: the cost of insurance.

Jerome Powell

With the country looking to the Fed for when it might begin cutting rates, the Fed itself continues to closely monitor inflation data for signals it has been able to tame rising costs. And Fed Chairman Jerome Powell told Congress that costs have continued to rise significantly across the various types of insurance, including car, medical and property protection.

“Insurance of various different kinds — housing insurance, but also automobile insurance, and things like that — that’s been a significant source of inflation over the last few years,” Powell said during his testimony before Congress. “And it’s to do with a million different factors.”

Omair Sharif, founder of the research firm Inflation Insights, told the New York Times that part of the increase in car insurance comes from the fact that parts and replacement vehicles have become a lot more expensive over recent years, and that is slowly feeding through to insurance premiums.

‘It’s a Significant Issue’

In addition, economists at Goldman Sachs expect that car insurance measure to have picked up sharply again in February, “reflecting strength in online insurance price data,” the Times report added.

Also on the rise: medical care insurance, and tenant and household insurance.

“In the longer term, companies are withdrawing from writing insurance in some coastal areas,” Powell told Congress. “It’s a significant issue.”