Consumers pinched by high food, energy costs: Fed
U.S. consumers pared spending in recent weeks as they struggled under the weight of higher food and energy costs, limiting the ability of retailers to raise other prices, the Federal Reserve said on Wednesday.
The Fed’s Beige Book, an anecdotal survey of economic conditions across the country, highlighted the pressures soaring commodity prices have put on producers, but suggested a broad inflationary surge had not taken hold.
Separately, Fed officials kept up warnings about building pressure on prices and the possibility that a self-feeding inflationary psychology could emerge. Such warnings have led financial markets to price in a series of interest rate hikes later this year.
“Any tendency for … longer-term inflation expectations to drift higher or even fail to reverse over time would have troublesome implications for the outlook for inflation,” said Federal Reserve Vice Chairman Donald Kohn.
The Fed has lowered benchmark interest rates to 2 percent from 5.25 percent since mid-September to support an economy slammed by a housing market collapse and credit crunch.
But the upward march of energy and other commodity prices has triggered a heightened focus on inflation, despite clear signs of U.S no fax payday loan. economic weakness, including five straight months of job losses.
The Beige Book, based on an informal survey of the Fed’s contacts across the nation in late April and through June 2, noted businesses were paying more for raw materials.
“Business contacts in most districts reported increases in input prices … especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food,” it said.
Filed under: news by Wolf