Several trends have started to reduce price pressures, though they won’t likely be enough to bring overall inflation back down to levels that Americans were used to anytime soon.
In a speech two weeks ago in Washington, Powell noted that there had been some progress in easing inflation in goods and housing but not so in most services. Physical goods like used cars, furniture, clothing and appliances have become steadily less expensive since the summer. Still, services costs are likely to stay persistently high, Powell suggested. In part, that’s because sharp increases in wages are becoming a key contributor to inflation. Services companies, like hotels and restaurants, are particularly labor-intensive. And with average wages growing at a brisk 5%-6% a year, price pressures keep building in that sector of the economy.