According to new research from the Federal Reserve Bank of New York, if you’re a black or Hispanic consumer and you think your pain is worse in this period of rising inflation, you may be right.
In the 12 months to May, consumer inflation 40-year high of 8.6%, and gas prices hit a record high. Consumers across the board have felt squeezed, but perhaps no more than Black and Hispanic consumers, who spend more in categories that have seen some of the highest inflation rates.
“When overall inflation began to rise in March 2021, inflation inequalities widened, with Black and Hispanic Americans experiencing higher inflation than the national average and Asian Americans experiencing lower inflation,” the report said. “These disparities are more than double that seen during 2019.”
Who is hurt by inflation? How the Fed broke down the data
Since the Bureau of Labor Statistics’ Consumer Price Index (CPI) report breaks down inflation rates by categories only, researchers used information from the government’s Consumer Expenditure Survey to determine how different demographics spend their money to create a basket. spends. for each group.
The researchers then applied weighted average inflation estimates to the components of the consumption basket for each demographic group. They found that Hispanics were experiencing inflation 0.6% worse than average and blacks were experiencing inflation 0.2% worse than average.
While it provides a glimpse into the inequalities created by inflation, it still underestimates the inequalities between groups.
The report states, “In addition to consuming different bundles of goods, different demographics face different prices for the same goods, with low-profit demographics facing higher price increases.” “
What are the differences in spending patterns?
Based on 2019 data, black consumers spend relatively more on transportation and housing and relatively less on food and entertainment than whites.
Inflation for used cars was 40% last year, although it has now sharply dropped to around 16%. And fares have increased since the government lifted its rent moratorium last year. Redfin said the average monthly rent exceeded $2,000 for the first time in May, up 15.2% from a year earlier to $2,002.
During this. The BLS said food inflation in the 12 months to May was 10.1%.
Why it’s important Is?
The Federal Reserve has a dual mandate: maximum employment and price stability.Fed last year focused on recovering jobs lost during the pandemic and let inflation heat up as it thought inflation was “temporary” that would work itself out once economies fully reopen.
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that helped employment rates, in general and for less privileged groups, nearly climb back to their pre-COVID levels , with the employment gap for black and Hispanic Americans at a several-decade low.
Higher costs:Fed rate hikes mean consumer costs are also higher
But now, inflation has risen sharply and especially in black and white. to Hispanic Americans, and researchers say the Fed should take note.
“These facts advance a monetary policy that seeks to maximize employment and price stability for all Americans.” “The way different demographic groups perceive inflation and the Fed’s response will be an important issue.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach him at firstname.lastname@example.org and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.