Inflation Relief Checks: summary news 14 December

Why is inflation so high?

The 0.5 percentage point increase is a smaller increase compared to the 0.75 point increases enacted by the Fed earlier this year. Increasing interest rates is a blunt tool for central banks to crush inflation by making borrowing less enticing and stopping people spending, adding a risk of a recession.

But that makes sense if inflation is being driven by people spending a lot of money, but with prices affected by the war in Ukraine as well as price gouging then hiking rates may not actually have the desired effect.

US NEWS

The Federal Reserve raises interest rates by 0.50 percentage points to the highest level since 2007

Despite back-to-back months of reduction in the rate of inflation, the Federal Reserve has persevered with its mission to tame it further by once again increasing interest rates.

The key interest rate has been increased by 0.5 percentage points to a target range of 4.25% to 4.50%, the highest since late 2007 during the banking crisis.

A forecast from the central bank showed that the interest rate could still be at 5% in a year’s time, meaning more increases are likely before they begin to taper off. At the beginning of 2022 the interest rate was nearly 0%.

Is a recession likely?

Impossible to say says Jerome Powell.

What did the Fed chief say about the latest interest rate rises?

It's not as important how fast we go... our focus right now is really on moving our policy stance to one that is restrictive enough to ensure a return of inflation to our 2% goal over time, it's not on rate cuts.

The inflation data received so far in October and November show a welcome reduction in the pace of price increases, but it will take substantially more evidence to give confidence inflation is on a sustained downward path.

Federal Reserve raises interest rates again

Forecasts from the Federal Reserve showed the bank's key interest rate could remain above 5% a year from now.

But policymakers are starting to move more cautiously. They agreed to lift the bank's key interest rate by 0.5 percentage points, a sdlight decrease on the last two 0.75 point increases.

That lifted the target range for the Fed's benchmark rate to 4.25% - 4.5% - the highest rate in 15 years.

Which countries have the highest rate of inflation?

President Biden has hailed the release of the November inflation report, which showed that price rises last month were running at 7.1% year-on-year. This was lower han many experts had predicted but remains far higher than is ideal. 

But it's not only the US who has struggled with high inflation during 2022, as this graph of annualised inflation rates shows...

US NEWS

Why have gas prices slowed down according to experts?

Record-breaking inflation pushed the average price of a gallon of regular unleaded to $5.02 in June, marking the first time that the average figure exceeded the $5-mark. But this week the average price of a gallon of gasoline in the United States has fallen to $3.18, more than ten cents less than the price recorded at the same point last year.

This suggests that, in terms of gas prices, the US has managed to undo the rapid price rises seen during 2022, something that President Biden celebrated on Tuesday at the White House:

“Most Americans can see the progress driving down the street, finding relief at the pump as gas prices fall,” Biden said.

So what is causing this fall in prices, and will it continue?

SOCIAL SECURITY

Social Security recipients who will receive two checks in December

Month after month, the Social Security Administration (SSA) sends checks to retired workers, eligible Supplemental Security Income (SSI) recipients and others such as recipients of survivor benefits. Although the SSA typically sends out one check per month, some beneficiaries will receive two payments in December.

During 2022, average pay for retired workers was $1,657 per month, while married couples received around $2,753. On the other hand, the average SSI benefit was $624 and the maximum check was $841.

Here's what you need to know about the December payment schedule...

What does slowing inflation mean for consumers?

The United States' economy, like that of nations all around the world, has been shook by the fluctuating conditions brought about by the pandemic. This sparked a surge of high inflation that has continued throughout 2022 and left consumers with less money in real terms. 

But as the rate of inflation begins to ease, does this mean there will finally be respite for Americans ahead of Christmas?

Biden responds to positive November inflation report

"In a world where inflation is rising at double digits in many major economies around the world, inflation is coming down in America.

In fact, this new report is the fifth month in a row where annual inflation has fallen in the United States.  Inflation outside of food and energy, a key measure of — that economists use, also fell.

Make no mistake — prices are still too high.  We have a lot more work to do.  But things are getting better, headed in the right direction."

Households' net worth fell again in Q3

The impact of inflation can be felt in any number of ways, from the prices of gasoline at the pump to the cost of groceries at the store. But beyond those day-to-day expenses, Americans have been suffering from a broader trend of devaluation of their assets which has hit their net worth. Axios reports that in Q3 the average net worth of American households fell, doing so for the third consectuvie quarter. 

FTX founder Sam Bankman-Fried arrested

The fallout from the bankruptcy of crpytocurrency exchange FTX continues with the arrest of founder Sam Bankman-Fried in the Bahamas. The world's youngest self-made billionaire was the subject of criminal charges earlier this week, which reportedly included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. 

“S.B.F.’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against S.B.F. and is likely to request his extradition,” read a statement from the Bahamas government.

UK continues to experience double-digit inflation

The rate of price increase in 2022 has caused problems in countries across the world and many are still seeing inflation running above 10%. One of those nations in the UNited Kingdom, where the latest report, released today, found that inflation was at 10.7%. 

In comparison, the US has made solid progress on price rises. Biden celebrated that inflation had fallen to 7.1% in November, but sustained decreases will be needed to convince the Federal Reserve to resist the tempation to introduce another interest rate hike. 

FINANCIAL NEWS

According to Zillow, what will be cheaper in 2023, renting a house or buying it?

With 2023 just around the corner, the economic and financial forecasts for next year have not been long in coming. Zillow, an American technology real estate market company, has released its prediction for the next twelve months in the aforementioned sector.

Knowing how the real estate bubble will evolve will help you consider the possibilities of finding a new home, especially now that prices have shown a slight drop. 

So with that in mind, will it be cheaper to buy or rent a house in 2023? Let’s take a look...

What is the future of Social Security?

As the United States' population skews increasingly older, there is real concern that the current structure of Social Security benefits may become unsustainable in future. With a larger proportion of the population retired, rather than working and paying taxes, the burden will increase. 

Lawmakers appear poised for a major battle over benefits in the coming years, and one Treasury official warned that suggested cuts could leave retirees unable to cover living costs. 

SOCIAL SECURITY

What’s the COLA for 2023 for Social Security?

The Social Security Administration (SSA) announced an 8.7 percent cost-of-living adjustment increase for 2023 in October. The boost to Social Security benefits is the largest since 1981 and the fourth biggest in the history of COLA increases.

The increase will affect payments for old-age, survivor and disability benefits as well as Supplement Security Income, which will be the first payments to reflect the augmented amount hitting bank accounts 30 December 2022. 

What next for Student Loan Forgiveness program?

President Biden's hopes of implementing widespread studentloan relief for borrowers has faced a number of legal challenges from Republican-led states and borrowers who would not be able to receive the full amount from the program. It has left the administration unable to action the relief, pending a Supreme Court ruling. 

This explainer from NBC News highlights the importance of the upcoming court decision...

White House celebrates inflation progress

The rate of inflation in the United States fell to 7.1% in November, a new report from the Bureau of Labor Statistics found. The fall was more significant that experts have predicted and it was cause for celebration for President Biden, coming just before the busy holiday shopping period. 

It remains to be seen whether the Federal Reserve will continue to implement interest rate hikes or if the central bank decides that the economy is making sufficient progress on inflation. 

Will Federal Reseve continue with interest rate hikes?

The Federal Reserve has began a two-day set of meetings to discuss what measures will need to be taken to tackle inflation without plunging the US economy into recession.

Fast rising wages have been a particular concern for the policymakers. They have gone up as employers need to sweeten the deal to attract workers from a limited supply. There are currently about 1.7 jobs for every person unemployed. 

Inflation affects the cost of Christmas

Bloomberg has calculated the actual value of the 364 gifts mentioned in the famous song "Twelve Days of Christmas", finding that the total comes to a staggering $197,071.09 this year. This is almost 10% more than last year.⁠
⁠
PNC's Christmas Price Index, or CPI, is an annual tradition that measures the cost of buying the gifts given in the classic holiday song. This year's CPI is the third highest year-over-year increase in the index’s history.⁠ It was initially developed to include a holiday message to clients, but now it highlights market changes over time and is calculated using a method similar to the government’s consumer price index—also called CPI.⁠

Hello and welcome to AS USA!

Good morning! We'll be bringing you all the latest news and information on Wednesday, 14 December after the Bureau of Labor Statistics found that inflaiton continued to slow in November.