Article Analysis: Inflation

Gasoline lifts inflation, dents confidence

-Lucia Mutikani

According to Reuters, “consumer prices rose the most in 10 months in February [2012] as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.” Though the rise in gasoline prices has put a dent in consumer spending confidence, Americans still believe the prices are only temporary and will soon drop to a reasonable level. However, despite their beliefs consumer purchasing power is going to remain pressured by these unreasonable gas prices for the next few months at least according to Sam Bullard, a senior economist at Wells Fargo.

The Federal Reserve stated that the recent rise in energy prices would life inflation only temporarily. According to them in the long run inflation will likely run at or below the two percent target. The four dollar gasoline prices have lost their shock value, though they are still affecting the discretionary income spending of most lower-income households. The tension from Iran’s nuclear program has kept fears active of oil supply disruptions, which has pushed prices higher. Obama has considered tapping strategic oil stocks to ease price pressure.

Though gasoline prices are on the rise, there has also been some price relief for households. Food costs remained steady in February for the first time in one and a half years. Also, prices on apparel dropped more than they have since July of 2006. The price homeowners are willing to pay to rent rose at the slowest rate since April of last year. Rent prices have risen as more Americans are moving away from ownership as home prices decline persistently.