Inflation pressures were centered squarely on goods early in the pandemic, but they have recently been creeping into services — and important, into rents. Housing costs based on rents make up about a third of the Consumer Price Index, so the fact that landlords are charging more matters a lot for overall inflation.
Officials are also uncertain about when the supply chain crisis that has pushed up the cost of cars, couches and imported goods of all kinds will abate. There are early signs that shipping route snarls and depleted inventories may be moderating, but other signals suggest a return to normal will take time.
“You always see a few snowflakes, but it doesn’t amount to a storm yet,” Mr. Powell, the Fed chair, said during Senate testimony on Tuesday, referring to signs that kinks in the supply chain were resolving themselves.
Caroline McCroskey, 27 and from Tulsa, Okla., manages marketing for a furniture manufacturer that imports pieces from China and Cambodia and sells them to major retailers. The company has seen sharp cost increases as shipping container prices have rocketed higher.
“The freight is bad enough, but we’ve seen a dramatic increase in leather hides and fabrics,” she said. “Nobody is feeling super optimistic about shipping rates returning to normal anytime soon.”
High inflation is a political liability for the White House as Democrats head into a midterm election year when they will battle to retain control of Congress. Republicans have increasingly accused President Biden of driving prices higher by flooding the economy with too much money, including a third round of stimulus checks.
The administration is doing what it can to alleviate the supply chain problems, from pushing for longer port opening hours to releasing strategic petroleum reserves to help bring fuel prices down. But most economists say that those moves only help around the edges.
“Inflation has become a dominant political issue, but one that is largely out of the administration’s control,” Alec Phillips, an economist at Goldman Sachs, wrote in a recent research report.