February Consumer Price Index shows that inflation is continuing in 2024: here is what is driving prices up

The Bureau of Labor Statistics tracked a 0.7 percent increase in the Consumer Price Index in the first two months of 2024. The Federal Reserve’s objective is to establish a monetary policy that keeps inflation under two percent a year. The lower the figure, without tilting into negative territory, the better from the central bank’s perspective. And the Fed is not alone. For consumers who, over the last year, have seen housing, medical, and grocery bills continue to rise above the two percent threshold, bringing prices down is essential to ensuring the well-being of their household.

The markets driving inflation

Sixty percent of the increase in the CPI tracked in February was related to the rapid rise of gas (3.8 percent) and housing (0.4 percent). If energy prices continue to rise, there could be impacts across good markets as transportation costs force the price of goods up. Though the escalating tensions in the Middle East put some pressure on the price of petroleum, many analysts see the increase in prices at the pump as a reaction to seasonal trends and a decrease in refining capacity that limited supply in the Midwest earlier this year.

On housing, the situation is rather concerning, with renters paying 22 percent more than they were four years ago in February 2020. For reference, from 2016 to 2020, rental prices rose 15 percent, which is still faster than two percent per year but less than the figures recorded since the pandemic began. High-interest rates have limited supply and demand in the housing sector. This has led to an increase in prices as fewer houses are on the market, leaving those still interested in buying in a more competitive environment. Similarly, for renters, the short supply of affordable houses pushes some in need of housing clear out of the market. Though prices are still increasing, the rise is slowing, which will provide some relief. In an interview with Fox Business, Treasury Secretary Janet Yellen struck an optimistic tone on how the rental market will shift this year. “I have every expectation that the single biggest contributor to inflation is going to be moving down over this year,” said the secretary.

The consequences of increasing housing prices

Households are struggling. A Harvard University report published in January on the state of home renters reported that more people are homeless in the United States than ever before. The authors, however, assert that as more rental units currently under construction come onto the market, renters with “higher and middle incomes” can reduce their monthly expenditure on housing. However, the news is less positive for low-income renters, who face the greatest risk of experiencing homelessness. No, for this group, the authors believe that increases in rental assistance will be needed, and whether that assistance will come remains an open policy question.

Consider that a third of the more than forty-four million renters in the US, a third made less than $30,000 a year in 2022. After taxes, this comes to $2,500 a month—no state in the country where the average renter is not paying over $1,000. When considering essential costs faced by housing, like transportation, medical, food, and utilities, it is easy to understand how a growing number are unable to keep a stable roof over their head. For many housing rights advocates, providing housing assistance to those who have the greatest risks of losing their homes or have recently begun experiencing homelessness should be a policy no-brainer for policymakers. Working to eliminate homelessness makes assisting individuals who experience it more manageable and far less expensive for the public, and it is morally right.