Pay Cut
On Thursday, the US Labor Department released new inflation data, and it looks like your favorite Super Bowl appetizers are going to cost a lot more this year. The consumer price index for January increased 7.5% from last year–the highest inflation reading since 1982. Planning on serving some buffalo chicken wings, guacamole, and nachos for the big game? Food prices are up 7% over the past year. Need to fill up your car before you head to the watch party? Gasoline prices are up over 40% in the past year. All of this to say, inflation is affecting our everyday lives.
The monthly CPI rates were also higher than predicted, with headline and core CPI both increasing 0.6%. Following the report, stocks fell as investors became more concerned about rate hikes soon. The probability of the Fed rate increasing by 0.5% in March was 25% before the report. After the report was released, chances rose to 44.3%. Until inflation cools down, investors are going to continue to be concerned about potential rate hikes.
Inflation has masked the substantial pay raise those employees have seen. The 0.7% increase in wages was nearly offset by the 0.6% increase in monthly inflation, resulting in only a 0.1% increase in earnings for the month. Have you noticed the inflation affecting your paychecks?
No one knows for sure when this inflation will end. However, some experts have said the factors contributing to inflation in 2021 are likely going to continue pushing up inflation in the first half of 2022.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
