The latest numbers are "a gut punch to anyone who's been hoping that inflation would come down substantially," Mark Hamrick, Bankrate's senior economic analyst, tells me.
At this rate, it will take months before the Federal Reserve achieves its target benchmark rate of 2%. With inflation outpacing wage growth, that's a long time to wait for prices to go down.
And as long as inflation remains stubbornly high, interest rate hikes will continue. Rate increases help reduce inflation by making the cost of borrowing more expensive, but also tend to slow down the economy.
In a recent speech, Federal Reserve Chairman Jerome Powell reaffirmed the central bank's commitment to reducing inflation, stating that "we will keep at it until we are confident the job is done." However, interest rate hikes — one of the few tools the Fed has to combat inflation — will "bring some pain to households and businesses," due to higher debt costs, Powell said.
It's widely expected that the Fed will announce another "jumbo" rate hike of 75 basis points when the Federal Open Market Committee meets next week. This would follow two consecutive rate hikes of 75 basis points in June and July. The federal funds rate is currently 2.25% to 2.50%.
This is a double whammy for regular people: Inflation is already eroding their spending power, while continued rate hikes will increase the costs of credit cards, auto financing and personal loans.
However, since interest rate increases tend to have a lag effect on inflation, it's still possible that inflation will decelerate at a faster rate over the remainder of 2022.
Unfortunately, there isn't much most people can do to ride out inflation, but these money moves can still help.
