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Yellen: Inflation has come down considerably

During the hearing, Yellen pointed out that inflation “has come down considerably.”

“The measure that the Federal Reserve focuses on most, over the last 12 months, ran at 2.7%,” she explained.

Yellen is referring to the personal consumption expenditures (PCE) price index, which rose 2.7% in March 2024 from a year ago. This is up from a 2.5% annual increase in February but down significantly from its June 2022 peak of 7.1%.

The consumer price index (CPI) follows a similar trend, registering an annual increase of 3.5% in March 2024, a decrease from its peak of 9.1% in June 2022.

Although these inflation rates have decreased, it doesn't imply a reduction in prices; rather, the cost of many necessities remains high. For example, the food index from the CPI has increased by 25% since the beginning of 2020. Similarly, the shelter index has risen by 22% during the same period.

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A key aspect of Yellen's argument concerns wage growth.

“What's important to households, of course, they see that the prices of many goods they bought pre-pandemic are higher — not all but some — is that their wages have gone up by more than that, so their purchasing power, their inflation adjusted incomes are higher, not lower,” she stated.

Yellen referenced the newly released data on the employment cost index, which tracks changes in hourly labor costs for employers over time. According to the latest report, inflation-adjusted wages and salaries rose by 0.8% in the 12 months ending March 2024.

During her testimony, she also mentioned that household median wealth has increased since before the pandemic, the unemployment rate has been below 4% for the longest stretch in over 50 years and consumer sentiment is up 21% from one year ago.

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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