European stocks climb as global markets look for rebound; Stoxx 600 up 1%

LONDON — European stocks advanced on Friday as global markets looked to regain some ground after a bruising week, with investors assessing the outlook for inflation and interest rates.

The pan-European Stoxx 600 added 1% in early trade, with banks climbing 1.9% to lead gains as all sectors and major bourses entered positive territory.

European markets fell on Thursday as investors remained concerned about slowing growth, interest rate hikes and red-hot April inflation data from the United States, which sparked concerns that a path of aggressive interest rate hiking lies ahead.

US Federal Reserve Chairman Jerome Powell said Thursday that he could not guarantee a so-called “soft landing” that tempers inflation without pushing the economy into recession.

Global stocks have endured a rollercoaster week but look set to regain some ground on Friday. Shares in Asia-Pacific advanced by mid-afternoon with Japan’s Nikkei 225 leading the way on a 2.6% climb.

Meanwhile, US stock futures were higher in early premarket trade as investors hope the S&P 500 can avoid sliding into bear market territory, with the index closing down more than 18% from its all-time high on Thursday, just 2% shy of an official bear market.

The tech-heavy Nasdaq is already in a bear market, closing Thursday down more than 29% from its all-time high, while the Dow Jones Industrial Average has failed for six consecutive trading sessions.

The Stoxx 600 in Europe began Friday’s session down 13% since the beginning of the year.

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Investors are also monitoring the geopolitical fallout from the war in Ukraine. Russia on Thursday threatened retaliation against Finland after Finnish leaders said the northern European nation must apply to join NATO “without delay.”

European leaders are also facing a race to secure alternative gas suppliers after Moscow announced sanctions on European subsidiaries of its majority state-owned corporation Gazprom. The move came after Ukraine’s state-owned grid operator suspended Russian flows into Europe through a key entry point.

On the data front, French inflation was confirmed at an annual 5.4% in April.

Euro area industrial production readings for March are due on Friday morning.

In terms of individual share price movement, British investment company Bridgepoint Group jumped more than 10% following its annual general meeting, while Finnish state-owned energy company Fortum climbed 9.9% in early trade.

Shares of Belgian pharmaceutical company UCB fell 13% after the US Food and Drug Administration said it cannot approve a key psoriasis drug.

Swedish industrial company Atlas Copco dropped 75% due to recalculation after a share split which came into effect on Friday, whereby one share was replaced by four new ordinary shares and one redemption share.

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Senate confirms Powell for 2nd term as Fed fights inflation

WASHINGTON (AP) — The Senate on Thursday confirmed Jerome Powell for a second four-year term as Federal Reserve chair, giving bipartisan backing to Powell’s high-stakes efforts to curb the highest inflation in four decades.

The 80-19 vote reflected broad support in Congress for the Fed’s drive to combat surging prices through a series of sharp interest rate hikes that could extend well into next year. The Fed’s goal is to slow borrowing and spending enough to ease the inflation pressures.

Since February, when his first term expired, Powell had been leading the central bank in a temporary capacity.

He faces a difficult and risky task in trying to quell inflation without weakening the economy so much as to cause a recession. The job market remains robust and has strengthened to a point that Powell has said is “unsustainably hot” and contributing to an overheating economy.

Spiking prices across the economy have caused pain for millions of Americans whose wages aren’t keeping up with the cost of such necessities as food, gas and rent. And the prospect of steadily higher interest rates has unsettled the financial markets, with stock prices having tumbled for weeks.

In an interview with NPR’s “Marketplace” later Thursday, Powell acknowledged that the Fed’s ability to successfully slow the economy and reduce inflation without causing a recession — a so-called “soft landing” — depends on “factors that we don’t control,” such as Russia’s invasion of Ukraine and slowing growth in China.

That contrasts with previous, more-confident statements by Powell, including just last week when he said, “we have a good chance to have a soft or soft-ish landing.”

Powell’s support Thursday in the Senate was roughly in line with what he received four years ago, after he was first nominated as Chair by President Donald Trump. At that time, the Senate voted 84-13 to confirm him.

To some degree, Powell’s support in Congress reflects the blame that most Republicans assign to President Joe Biden’s $1.9 trillion COVID relief package — rather than to the Fed’s ultra-low rates — for causing high inflation. Many economists, including those who have served in previous Democratic administrations, agree that Biden’s legislation played a role in accelerating prices.

Powell’s confirmation comes as many economists have sharply criticized the Fed for waiting too long to respond to worsening inflation, making its task harder and riskier.

Prices first spiked a year ago, after Americans ramped up their spending once vaccines were administered and COVID restrictions began to decline. The surge in demand caught many businesses unprepared and short on supplies, causing prices for goods like cars, furniture and appliances to soar — if consumers could even find them. High inflation has since spread to most of the rest of the economy, including rents and such other services as hotel rooms, restaurant meals and medical care.

For months, Powell repeated his view that inflation was merely “transitory” and would soon ease as supply bottlenecks were resolved. The Fed continued buying Treasury and mortgage bonds until March, when prices had soared 8.5% compared with a year earlier. The bond purchases were intended to keep long-term loan rates down. It was only two months ago that the central bank raised its benchmark rate from near zero to a range of 0.25% to 0.5%.

“They could have started to wind down (bond purchases) earlier, started to tighten monetary policy sooner, especially once this strong data started to come in,” said Kristin Forbes, an economist at MIT’s Sloan School of Management and a former member of the Bank of England’s monetary policy committee.

Powell and other officials have since acknowledged that the Fed could have started dialing back its stimulus earlier. They suggest, though, that most economists outside the Fed also initially thought high inflation would prove short-lived.

“Hindsight says we should have moved earlier,” Powell acknowledged during a Senate hearing in early March.

The Fed’s view that inflation mostly reflected supply shocks that would soon fade “turned out to be wrong,” Powell conceded, “not maybe conceptually wrong, but it’s just taking so much longer for the supply side to heal than we thought.”

Christopher Waller, a member of the Fed’s board, said last week that the central bank was partly thrown off by reports last August and September suggesting that the job market was weakening. Slower hiring would have made it harder for workers to secure sizable pay raises and so would have helped keep inflation in check.

But those hiring reports, and the three that followed, were later revised higher by a total of about 1.5 million jobs, Waller said, underscoring the extraordinarily high demand for labor that has also sharply raised wages.

“If we knew then what we know now, I believe (Fed policymakers) would have accelerated tapering (of bond purchases) and raised rates sooner,” Waller said Friday. “But no one knew, and that’s the nature of making monetary policy in real time.”

The Senate has already confirmed three of Biden’s other picks for the Fed’s Board of Governors: Lael Brainardwho is now vice chair, and Lisa Cook and Philip Jefferson. All three will vote on the central bank’s interest rate decisions and financial regulatory policies.

Cook and Jefferson are both Black, meaning that the Fed’s board now has two Black members for the first time in its 108-year history. Cook, an economics and international relations professor at Michigan State, will be the first Black woman to serve on the board.

Biden has also nominated Michael Barr, a former Treasury Department official who helped draft the 2010 Dodd-Frank financial regulation law, to be the Fed’s top banking regulator and fill the last open spot on the seven-member board. Sen. Sherrod Brown, the Ohio Democrat who is chairman of the Senate Banking Committee, said Thursday that his committee would hold a hearing on Barr’s nomination next week.

In the past, politicians have often objected to higher interest rates out of fear that they would cause job losses. The chronically high inflation of the 1970s has been attributed, in part, to political pressure that led the Fed to forgo steep rate hikes under Presidents Lyndon Johnson and Richard Nixon.

Powell himself endured harsh criticism by Trump when the Fed raised rates in 2017 and 2018 after the unemployment rate had reached a half-century low of 3.5%. Powell reversed some of those hikes in 2019, after the economy had slowed in the aftermath of Trump’s tariffs on Chinese imports.

This week, Biden said that while he would respect the Fed’s independence, he supported his efforts to raise borrowing rates, which have already caused the costs of mortgages, auto loans and business borrowing to arise.



Powell: ‘Soft’ economic landing may be out of Fed’s control

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell, fresh off winning Senate confirmation for a second term earlier in the day, acknowledged for the first time Thursday that high inflation and economic weakness overseas could thwart his efforts to avoid causing a recession.

For weeks, Powell has portrayed the Fed’s drive to raise interest rates as consistent with a so-called “soft landing” for the economy. Under that scenario, the Fed would manage to tighten borrowing costs enough to cool the economy and curb inflation without going so far as to tip the economy into recession.

But in an interview on NPR’s “Marketplace,” Powell conceded. that balancing act — which many economists have said they doubt the Fed can achieve — could be undercut by economic slowdowns in Europe and China.

“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control,” the Fed chair said. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”

Such comments reflect less confidence in avoiding a recession than Powell has previously conveyed. Just last week, he said at a news conference: “I think we have a good chance to have a soft or soft landing or outcome.”

On Thursday, he said that slowing inflation to the Fed’s 2% annual target — from its current 6.6%, according to the central bank’s preferred measure — “will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels.”

Europe’s economies are suffering from high inflation, exacerbated by Russia’s invasion of Ukraine and the resulting spike in natural gas and oil prices. Europe has been far more dependent on Russian energy supplies than the United States has been.

China’s strict COVID lockdown policies have shut down ports, hindering exports and slowing consumer spending in cities like Shanghai, where millions of Chinese have been largely restricted to their homes for weeks.

In his interview with NPR, Powell also seemed to suggest that the Fed would at least consider raising its benchmark rate by an extremely large three-quarters of a point if inflation failed to show signs of easing in the coming months. Last week, the stock market initially soared when Powell appeared to take a three-quarter-point rate hike off the table.

After repeating his comment from last week that half-point hikes were likely at each of the next two Fed meetings, in June and July, Powell added Thursday: “If things come in better than we expect, then we’re prepared to do less . If they come in worse than when we expect, then we’re prepared to do more.”

When asked if “do more” meant a three-quarter point hike, Powell said: “You’ve seen this committee adapt to the incoming data and the evolving outlook. And that’s what we’ll continue to do.”



Iran raises prices of food staples, stirring panic and anger

DUBAI, United Arab Emirates (AP) — Iran abruptly raised prices as much as 300% for a variety of staples such as cooking oil, chicken, eggs and milk on Thursday. Scores of alarmed Iranians waited in long lines to snatch up bundles of food and emptied supermarket shelves across the country in the hours before the price hike took effect.

Panicked shoppers raided stores and stuffed basic goods into large plastic bags, according to footage shared widely on social media. Lines in Tehran snaked out of grocery stores late Wednesday. On Thursday, Iran’s currency dropped to a low of 300,000 rials to the dollar.

Internet disruptions were reported across Iran as the government braced for possible unrest, advocacy group said. Protests appeared to spring up in the remote and impoverished south, according to videos shared online. The Associated Press could not verify their authenticity but the footage corresponded to reported events.

The scenes revealed not only deep anxiety gripping the country and frustration with Iran’s leaders, but also underscored the staggering economic and political challenges facing them.

Food prices across the Middle East have arisen due to global supply chain snarls and Russia’s invasion of Ukraine, which both export many essentials. Iran imports half of its cooking oil from Ukraine, where fighting has kept many farmers from the fields.

Although Iran produces roughly half of its own wheat, it imports much of the rest from Russia. The war has added to inflationary pressures. Smuggling of Iran’s highly subsidized bread into neighboring Iraq and Afghanistan has spiked as hunger spreads across the region.

Drought is already ravaging Iran’s economy. Western sanctions over Iran’s nuclear deal have caused additional difficulties. Inflation has soared to nearly 40%, the highest level since 1994. Youth unemployment also remains high. Some 30% of Iranian households are below the poverty line, reports Iran’s Statistics Center.

Iranian President Ebrahim Raisi has promised to create jobs, lift sanctions and rescue the economy, but talks to revive Iran’s tattered nuclear deal with world powers remain deadlocked. Iranian families have seen their purchasing power rapidly diminish.

The government is trying to act swiftly to blunt the pain. Authorities have promised to pay every Iranian citizen some $14 a month to compensate for the price hikes.

The cost of special and artisan breads, such as French baguette and sandwich bread, has multiplied by 10, bakery owners say. But authorities are careful not to touch subsidies on the country’s flatbread, which contributes more to the Iranians’ daily diet than anything else.

Subsidies, and bread subsidies in particular, remain a highly sensitive issue for Iran, which has been roiled by bread riots throughout its history. In the 1940s, bread shortages triggered mass street protests and a deadly crackdown that brought down then-Premier Ahmad Qavam.

Memories of Iran’s fuel price hike three years ago also remain fresh. Widespread protests — the most violent since the creation of the Islamic Republic in 1979 — rocked the country. Hundreds of demonstrators were killed in the crackdown, according to Amnesty International.

But in recent weeks, the government has allowed prices to rise for almost every other staple, including pasta, until Thursday’s hike for remaining Iranian dinner table basics.

As Iranians vent about the rising prices of flour, the top trending hashtag on Twitter in recent weeks has been #macaroni — the term Iranians use for all types of pasta.

“I am sure the government does not care about average people,” Mina Tehrani, a mother of three told the AP as she browsed a supermarket in Tehran. She stared in shock at a price tag for pasta — now 165,000 rials for a pound, compared to 75,000 rials last month.

Iranians who had forgone meat or dairy to save money have nothing left to cut, complained Tehran resident Hassan Shahbazzadeh.

“Now even macaroni is taken off their dining table,” he said.

“This jump in the price of flour has made people crazy,” said Saleh, a grocery store worker in Susangerd, a city in the oil-rich southwestern province of Khuzestan, home to an ethnic Arab population that has alleged discrimination and includes a separatist movement.

Saleh said that the price of a sack of 40 kilograms of flour had soared to the equivalent of $18 from $2.5 in recent weeks, stoking intense anger in the restive province.

“Many rushed to groceries to buy macaroni and other things for their daily needs,” he said, giving only his first name for fear of reprisals.

Tempers have also flared in Iran’s parliament.

“The waves of increasing in prices have made people breathless,” Kamal Hosseinpour, a lawmaker for the Kurdish area, thundered in a parliament session earlier this week. Macaroni, bread and cooking oil are the main staples of Iran’s weaker people. … Where are the officials and what are they doing?

Other lawmakers have directly rebuked hard-line President Raisi.

“The administration is incapable in managing the country’s affairs,” said Jalil Rahimi Jahanabad, a lawmaker for the Taibad province near Iran’s border with Afghanistan.

Supporters of the government have described the price hikes as “necessary economic surgery” — part of a parliament-approved reform package. Some social media users have ridiculed the term, saying officials have removed the patient’s heart instead of the tumor.

As outrage over rising inflation surges online, Iranian authorities appear to be bracing for the worst.

Internet monitoring group told the AP that it was tracking internet disruptions at a “national scale” that “are likely to impact the public’s ability to communicate.” Article 19, a global research organization that fights censorship, reported on Thursday that authorities appeared to have shut down almost all internet connectivity in cities across Khuzestan province.

Since the country’s 2009 disputed presidential election and the Green Movement protests that drew millions to the streets, Iran has tightened its control over the internet.

Videos have surfaced on social media in recent days of Iranians gathering in the dark in the streets of the southern Khuzestan province, chanting slogans against price hikes and against the country’s leaders. Iranian state media has not publicly addressed the protests.

The issue of high prices “is security-related,” lawmaker Majid Nasserinejad said ominously. “People cannot tolerate it anymore.”


Associated Press writer Nasser Karimi in Tehran, Iran, contributed to this report.



UK economy ‘only going to get worse’ as growth slowdown begins

The UK economy shrank by 0.1% in March and the situation is expected to worsen as the country’s cost-of-living crisis escalates.

Tim Ireland | Xinhua News Agency | Getty Images

LONDON — A growth slowdown is underway in the UK after the economy shrank by 0.1% in March, with economists expecting further contractions this year.

Although the economy grew 0.8% for the first quarter as a whole, slightly below consensus forecasts for 1% growth, January was the only positive month of the quarter. The war in Ukraine and subsequent supply chain problems and energy price spikes have compounded the toll of inflation, which is running at a multi-decade high.

Sterling hit a two-year low versus the US dollar following the data as traders digested growing uncertainty about the UK’s economic outlook.

The surprise monthly contraction in March — economists had expected the figure to come in flat — presents a worry for Prime Minister Boris Johnson’s government as the country’s cost-of-living crisis is yet to reach its peak.

“Ultimately, things are only going to get worse for consumers. Energy bills are expected to soar again later this year when the price cap is reassessed, while inflation is proving stickier than expected,” said Hinesh Patel, portfolio manager at Quilter Investors.

UK inflation hit a 30-year high of 7% in March and in April, the country’s energy regulator increased its price cap by 54% to accommodate soaring prices. In the Queen’s Speech to mark the state opening of parliament on Wednesday, the government promised to focus on economic growth in order to address the spiraling cost of living.

Patel added that the Bank of England now faces a “near impossible task of managing the economy out of this quagmire.”

“They are in aggressive rate raising mode for now, but this cannot remain the case for long given the economic issues already starting to play out,” he added.

The Bank of England has hiked interest rates at four consecutive policy meetings as it looks to rein in inflation, and markets are pricing in another five hikes by spring of 2023.

However, James Smith, developed markets economist at ING, suggested that the central bank’s more cautious tone in recent weeks indicates that it will not meet these expectations, and may settle for a couple more hikes before hitting pause so as not to exert further downward pressure on economic growth.

Thursday’s GDP figures also showed that the UK’s dominant consumer-facing services industry took a substantial hit in March, falling 1.8% as consumer spending declined amid the squeeze on households.

Health spending to fall away

ING’s Smith said a second consecutive decline in output should be expected in April, coinciding with the end of free Covid-19 testing.

“Surprisingly, health output actually increased in March despite the ongoing wind-down of Covid-related activities, but clearly, that’s unlikely to last,” Smith noted.

“Health spending has been a key driver of GDP through the pandemic, and in fact, the overall size of the economy would be around 1% smaller had output in this sector stayed flat since early-2020.”

Caroline Simmons, UK chief investment officer at UBS Global Wealth Management, was also cautious looking ahead.

“There is growing potential for UK GDP to be negative in the second quarter, which is in part due to the consumer squeeze from energy price rises,” she said.

UK stocks insulated

As concerns about the growth outlook in the coming quarters grow, investors are also considering the impact it could have on markets.

However, Simmons noted that the UK economy is not representative of the UK equity market. UBS sees upside to the FTSE 100 index with a December target of 8,100; the FTSE was trading around 7172 mid-morning Thursday.

Importantly for the UK, both labor demand and business investment intentions remain firm, reducing the risk of a sharp downturn in overall growth, according to Daniel Casali, chief investment strategist at Tilney Smith & Williamson.

The Bank of England expects growth to be flat in the second quarter, though Casali also noted that there is potential for a modest contraction.

“For investors, given that the large cap UK-listed companies derive the bulk of their sales abroad, it really is global growth that matters,” Casali added.

The IMF recently reduced its global growth forecast to 3.6% for 2022 and 2023, from 6.1% last year.

“Along with the sharp EPS gains made by the energy sector, the outlook for UK company profits has improved. The consensus forecasts 15% Earnings Per Share growth for 2022, a big pick-up from just under 3% at the start of the year ,” Casali added.

“At the very least, rising company earnings (and cheap valuations) should limit UK equity downside in current volatile market conditions.”



Investors digest US inflation data for April

LONDON — European stocks are expected to fall sharply at the open as global markets digest the latest inflation reading out of the United States. The reading has sparked concerns that a path of aggressive rate hiking lies ahead.

The UK’s FTSE index is seen opening 88 points lower at 7,251, Germany’s DAX 216 points lower at 13,596, France’s CAC 40 down 107 points at 6,150 and Italy’s FTSE MIB down 488 points at 22,953, according to data from IG.

Global investors are digesting the April inflation reading from the US, which showed the consumer price index surged 8.3% in April as compared with a year ago. The inflation rate was higher than expected and still running close to a 40-year high of 8.5%.

Analysts are mixed on whether the data suggests inflation has hit a peak.

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The April reading, which represented a slight ease from March’s peak, was also above the Dow Jones estimate for an 8.1% gain. Shares on Wall Street dropped following the data and markets in Asia-Pacific declined in Thursday morning trade following the losses stateside.

US stock futures were slightly higher Wednesday evening as investors look ahead the latest US data on jobless claims and the producer price index, which measures prices at the wholesale level.

In Europe, earnings come from Veolia, Bouygues, Aegon, Allianz, Commerzbank, RWE, Siemens and Zurich Insurance. UK preliminary GDP figures for the first quarter are also due.



Investors digest US inflation data for April

LONDON — European stocks are expected to fall sharply at the open as global markets digest the latest inflation reading out of the United States. The reading has sparked concerns that a path of aggressive rate hiking lies ahead.

The UK’s FTSE index is seen opening 88 points lower at 7,251, Germany’s DAX 216 points lower at 13,596, France’s CAC 40 down 107 points at 6,150 and Italy’s FTSE MIB down 488 points at 22,953, according to data from IG.

Global investors are digesting the April inflation reading from the US, which showed the consumer price index surged 8.3% in April as compared with a year ago. The inflation rate was higher than expected and still running close to a 40-year high of 8.5%.

Analysts are mixed on whether the data suggests inflation has hit a peak.

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The April reading, which represented a slight ease from March’s peak, was also above the Dow Jones estimate for an 8.1% gain. Shares on Wall Street dropped following the data and markets in Asia-Pacific declined in Thursday morning trade following the losses stateside.

US stock futures were slightly higher Wednesday evening as investors look ahead the latest US data on jobless claims and the producer price index, which measures prices at the wholesale level.

In Europe, earnings come from Veolia, Bouygues, Aegon, Allianz, Commerzbank, RWE, Siemens and Zurich Insurance. UK preliminary GDP figures for the first quarter are also due.



US inflation dips from 4-decade high but still causing pain

WASHINGTON (AP) — Inflation eased slightly in April after months of relentless increases but remains near a four-decade high, imposing a continuing financial strain on American households.

Consumer prices jumped 8.3% last month from a year ago, the government said Wednesday. That was below the 8.5% year-over-year surge in March, which was the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the smallest rise in eight months.

Still, Wednesday’s report contained some cautionary signs that inflation may be becoming more entrenched. Excluding the volatile food and energy categories, so-called core prices jumped twice as much from March to April as they did the previous month. The increases were fueled by spiking prices for airline tickets, hotel rooms and new cars. Apartment rental costs also kept rising.

Those price jumps “make clear that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, US economist at asset manager AB.

Even if it moderates, inflation will likely remain high well into 2023, economists say, leaving many Americans burdened by price increases that have outpaced pay raises. Especially hurt are lower-income and Black and Hispanic families, who on average spend a greater proportion of their incomes on gas, food and rent.

Wednesday’s report also underscored the challenges for the Federal Reserve and White House in their struggles to tame inflation.

In April, a fallback in gas prices helped slow overall inflation. Nationally, average prices for a gallon of gas fell to as low as $4.10 in April, according to AAA, after having spiked to $4.32 in March. But since then, gas prices have surged to a record $4.40 a gallon.

Grocery prices, too, are still soaring, in part because Russia’s invasion of Ukraine has heightened the cost of wheat and other grains. Food prices rose 1% from March to April and nearly 11% from a year ago. That year-over-year increase is the biggest since 1980.

Such rapid inflation has led many Americans to cut back on spending. Among them is Patty Blackmon, who said she’s been driving fewer of her grandchildren’s sports events since gas spiked to $5.89 in Las Vegas, where she lives.

To save money, Blackmon, 68, also hasn’t visited her hairdresser in 18 months. And she’s reconsidering her plan to drive this summer to visit relatives in Arkansas. She was shocked recently, she said, to see a half-gallon of organic milk reach $6.

“Holy cow!” she thought. “How do parents give their children milk?”

Blackmon has cut back on meat, and “a steak is almost out of the question,” she said. Instead, she is eating more salads and canned soups.

Likewise, David Irby of Halifax, Virginia, said he’s been cutting back on food and other higher-cost expenses. A veteran who retired on disability in 2015, Irby, 57, said he has switched to chicken from beef and quit buying bacon or junk food, like his favorite treat, Cheetos.

Irby’s biggest worry? Replacing his 22-year-old Ford truck, which is no longer reliable on long trips. A new one costs $50,000. Even a 5-year old used version is about $40,000.

“I don’t know how people on a fixed income can buy a vehicle now,” he said. “It takes me almost two years to make $40,000.”

Turmoil overseas could potentially accelerate inflation in the coming months. If the European Union, for example, decides to bar imports of Russian oil, world oil prices could rise. So could US gas prices. And China’s COVID lockdowns could worsen supply chain snarls.

In April, airfares soared a record 18.6%, the largest monthly increase since record-keeping began in 1963. And hotel prices jumped 1.7% from March to April.

Southwest Airlines said last month that it foresees much higher revenue and profits this year as Americans flood airports after having postponed travel for two years. Southwest said its average fare soared 32% in the first three months of the year from the same period last year.

There are, though, signs that supply chains are improving for some goods. Wednesday’s report showed that prices for appliances and clothing both fell 0.8%, while the cost of used cars dropped 0.4%, the third straight decline. Used cars and other goods drove much of the initial inflation spike last year as Americans stepped up spending after vaccines became widespread.

Inflation is also posing a serious political problem for President Joe Biden and congressional Democrats in the midterm election season, with Republicans arguing that Biden’s $1.9 trillion financial support package last March overheated the economy by flooding it with stimulus checks, enhanced unemployment aid and child tax credit payments.

On Tuesday, Biden sought to take the initiative and declared inflation “the No. 1 problem facing families today” and “my top domestic priority.”

Previous signs that US inflation might be peaking didn’t last. Price increases decelerated last August and September, suggesting at the time that higher inflation might be temporary, as many economists — and officials at the Fed — had suggested. But prices shot up again in October, prompting Fed Chair Jerome Powell to start shifting policy toward higher rates.

Wednesday’s figures will keep the Fed on track to implement what may become its fastest series of interest rate increases in 33 years, economists said. Last week, the central bank raised its benchmark short-term rate by a half-point, its steepest increase in two decades. And Powell signaled that more such sharp rate hikes are coming.

The Powell Fed is seeking to pull off the notoriously difficult — and risky — task of cooling the economy enough to slow inflation without causing a recession. Economists say such an outcome is possible but unlikely with inflation this high.

One of the Fed’s concerns is that Americans might start to expect chronically high inflation, which can make rising prices harder to bring under control because such expectations can be self-fulfilling. If Americans expect costs to rise, they will likely demand higher pay. Those higher labor costs, in turn, can force companies to charge more, thereby heightening inflation.

So far, measures of longer-term inflation expectations have remained largely in check even as prices have soared. Still, some people are starting to push for higher wages as prices rise.

“We haven’t had raises yet based on inflation, and we think we should because now inflation is so high,” Rochelle Guillou, 26, said, referring to her and her friend Hannah Lerman, who work at a startup in Boston.

Lerman, 25, said she thinks the cost of everything from food to online delivery services to clothes is on the way up.

“Rent is a huge issue,” she said. “They’re actually trying to sell my building right now, so we know our rent is going to go up. We don’t even know how much but yeah, rent is going crazy.”


AP Writers Anne D’Innocenzio in New York and Steve LeBlanc in Boston contributed to this report.



How fast does inflation cut buying power? Here’s a simple guide

Louis Alvarez | digitalvision | Getty Images

Inflation is hovering near 40-year highs. The Consumer Price Index, a key inflation metric, increased 8.3% in April from a year ago, the largest jump since the summer of 1982, the US Department of Labor said Wednesday.

While a slight reduction from the 8.5% rate in March, the readings tell a similar story: Consumers are losing buying power at a faster-than-usual rate.

That happens because the prices they pay for goods and services of all kinds are increasing. Their money buys less.

But just how quickly is inflation eating away at your savings? The “rule of 72” can help gauge its long-term impact.

Rule of 72

This rule of thumb is generally applied to investment returns. It’s a back-of-the-envelope calculation that approximates how many years it will take investors to double their money at a certain interest rate.

Here’s how it works: Divide 72 by the annual interest rate to determine the amount of time it takes for an investment to double.

For example, a mutual fund that yields 2% a year will double in 36 years. One with a 6% annual return will do so in 12 years.

With inflation, the rule works in reverse: Consumers can approximate how quickly higher prices (for food, energy, rent and other household budget items) will halve the value of their savings.

Applied to the Rule of 72 formula, April’s 8.3% inflation rate halves the value of consumers’ money in roughly nine years. (Seventy-two divided by 8.3 equals 8.67.)

“[The rule] works the same whether you’re implying an inflation factor — which is essentially deflating the purchasing power of your money — or whether you’re applying the rule of 72 to growing your money,” Charlie Fitzgerald III, a certified financial planner and founding member of Moisand Fitzgerald Tamayo in Orlando, Florida, told CNBC.

What to keep in mind

There are a few caveats, however.

For one, this rule assumes the inflation rate will stay elevated (and constant) for a while. It’s unclear how long higher-than-normal inflation will persist. The Federal Reserve is quickly raising its benchmark interest rate to increase borrowing costs, cool the economy and bring inflation more in check.

A healthy economy experiences at least some inflation. The Federal Reserve aims for a long-term rate around 2%. (That inflation rate would halve the value of money in approximately 36 years, according to the rule of 72.)

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Further, rising costs don’t impact all households the same way. Some families may have a personal inflation rate that’s lower (or higher) than the national average, depending on what they buy.

Wage growth and earnings on savings also serve to offset at least some inflation. Workers have seen hourly pay increase at the fastest pace in decades, and some gains have outpaced inflation — meaning their purchasing power hasn’t eroded.

However, the average worker saw hourly pay fall 2.6% in April from a year ago after accounting for inflation, according to the Labor Department.



Two-thirds of Americans live paycheck to paycheck as inflation climbs

Inflation is showing no signs of slowing down, making it harder for workers to make ends meet.

The Consumer Price Index increased 8.3% from a year ago, higher than the 8.1% estimate, according to the US Bureau of Statistics.

Although it was down slightly from the March peak, inflation is still growing at the fastest annual pace in about four decades.

Rising prices are putting household budgets in a vise.

Greg McBride

chief financial analyst at

“Rising prices are putting household budgets in a vise,” said Greg McBride, chief financial analyst at “Price increases are widespread, but look at food and shelter — which together account for 40% of the weighting in the CPI and more than that for many households.”

Food prices are up at the fastest pace in more than 41 years and the shelter index, which makes up about one-third of the CPI weighting, was up 5.1% on a yearly basis, its fastest gain since March 1991.

While wage growth is high by historical standards, it isn’t keeping up with the increased cost of living.

When wages rise at a slower pace than inflation, those paychecks won’t go as far at the grocery store and at the gas pump — two areas of the budget that have been particularly squeezed.

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Credit card debt is heading to an all-time high
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As of March, close to two-thirds, or 64%, of the US population was living paycheck to paycheck, just shy of the high of 65% in 2020, according to a LendingClub report.

“The number of people living paycheck to paycheck today is reminiscent of the early days of the pandemic and it has become the dominant lifestyle across income brackets,” said Anuj Nayar, LendingClub’s financial health officer.

Consumers who are struggling to afford their day-to-day lifestyle tend to rely more on credit cards and carry higher monthly balances making them financially vulnerable, the survey of more than 2,600 adults found.

Overall, credit card balances rose year over year, reaching $841 billion in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.

At this rate, balances could soon reach record levels amid higher prices for gas, groceries and housing, among other necessities, according to Ted Rossman, a senior industry analyst at

Anyone with revolving debt will also see the annual percentage rate on their credit card head higher as the Federal Reserve hikes interest rates to try and tamp down rising prices.

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