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How the Consumer Price Index report could impact you

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Posted at 1:56 PM, May 10, 2022
and last updated 2022-05-10 13:56:11-04

On Wednesday, the Bureau of Labor Statistics (BLS) will release April’s Consumer Price Index (CPI) report which gives a snapshot of current inflation numbers.

It is a report that comes out each month, but this month’s report is perhaps more crucial than others because it will give an idea of whether inflation is nearing its peak.

Since January 2021, the prices of goods have steadily climbed to their highest rate in decades. According to the BLS, inflation in the year leading up to January 2021 was 1.7%, but in the year leading up to March 2022, 14 months later, prices had risen 8.5%.

Looking deeper, the rate at which prices are rising month over months has also increased. According to federal data, July 2021 to August 2021 saw a 0.3% increase in prices, but from February 2022 to March 2022, prices increased 1.2%.

“I think what good news would be from this report would be to see that the rate of increases has slowed down,” said Christina Huber, a professor of economics at the Metropolitan State University of Denver.

On May 4, the Federal Reserve enacted its anticipated 0.5% rise in interest rates, its first interest rate hike since 2018 and its largest since 2000, to combat rising home and car prices.

Interest rate hikes have a major impact on how much people pay on loans. For example, a person could have just bought a $30,000 car with a five-year loan at 3% interest. An extra half a percentage point would mean they are paying an extra $400 over the course of that five years.

The Federal Reserve will use Wednesday’s report to help determine if it will raise that interest rate more, and by how much.

“So, I think this month’s inflation report is key to look at to see is that working,” said Huber. “Has that drastic interest rate hike worked, or do we need to continue to do this, and the Federal Reserve fully expects to increase several more times in the coming years.”

“So, expenditures that require a loan, whether it be a mortgage or a car loan, that’s where we’re starting to see the slow down [in prices],” said Mac Clouse, a professor of finance at the University of Denver. “But that’s not what makes up most of the consumer price index.”

The CPI is a snapshot of overall prices, so it is possible that prices in certain goods can continue to rise, even if the CPI goes down or shows a slower rate of increase. That is why Clouse says it remains important to budget and pay attention to personal finances.

“For people to think that the Fed doing things is going to impact the supply side where we’ve got much of our inflation coming from just isn’t going to happen,” he said. “[Inflation] is taking a bigger bite out of when you go to the gas pump and when you go to the grocery store and those are the things that impact consumers the most.”

Once it is released at 8:30 a.m. EST, Wednesday’s CPI report can be viewed here.