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Inflation decline to be delayed due to high corporate pricing power: ING report

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April’s Consumer Price Index (CPI) report showed a year-over-year increase in prices of 8.3%, and, while still considered high, the figure did mark a deceleration in average price increases compared to last month.

Prices increased 8.5% in March, the highest increase since 1982. Analysts have cautiously noted that inflation may have already peaked for the year, as some of the inflationary pressures driving energy prices up have eased a little. Yet many of the macroeconomic conditions which helped generate high inflation levels still remain in place, according to ING’s (ING) Chief International Economist James Knightley.

“Businesses retain the ability to pass higher costs onto their customers and this will keep inflation sticky,” Knightly wrote in a report released Tuesday. “Ongoing supply chain issues and rising fuel costs mean 2% inflation is a distant prospect.”

Grocery store shelves where baby formula is typically stocked are locked and nearly empty in Washington, DC, on May 11, 2022. - It's a parent's worst nightmare. The United States is in the grip of a severe shortage of baby formula -- with a mass product recall aggravating pandemic supply chain woes -- sending families on sometimes desperate hunts for the vital supplies.
And it's been going on for months, according to Sara Khan, the mother of three children ages 10 years, seven years and six months. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)
Grocery store shelves where baby formula is typically stocked are locked and nearly empty in Washington, DC, on May 11, 2022. - It's a parent's worst nightmare. The United States is in the grip of a severe shortage of baby formula -- with a mass product recall aggravating pandemic supply chain woes -- sending families on sometimes desperate hunts for the vital supplies. And it's been going on for months, according to Sara Khan, the mother of three children ages 10 years, seven years and six months. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)

As these supply issues drive labor costs up, businesses continue to pass higher costs onto consumers in the form of higher prices.

Data from the National Federation of Independent Business revealed that 70% of companies raised their selling prices within the past 3 months. This number is slightly less than last month's 72% balance, but still constitutes the second-highest percentage in the survey's 47-year history. Approximately 46% of firms surveyed intend to raise prices further over the next three months, which is the sixth-highest percentage since the survey was first conducted.

“[The dataset] reinforces the message [that] despite concerns about where the economy is heading, businesses continue to have pricing power and highlights the breadth of inflation pressures in the economy,” Knightly explained. “The ability to raise prices is seen across all sectors and all sizes of businesses.”

Federal Reserve Chairman Jerome Powell and Sherrod Brown (D-OH) arrive to testify before the Senate Banking Committee hearing titled The Semiannual Monetary Policy Report to the Congress in Dirksen Building in Washington, D.C., March 3, 2022. Tom Williams/Pool Via REUTERS
Federal Reserve Chairman Jerome Powell and Sherrod Brown (D-OH) arrive to testify before the Senate Banking Committee hearing titled The Semiannual Monetary Policy Report to the Congress in Dirksen Building in Washington, D.C., March 3, 2022. Tom Williams/Pool Via REUTERS

As consumers and businesses alike continue to struggle with high inflation, the Federal Reserve has ramped up its hawkish monetary policy. Earlier this month, the Fed raised its target range to between 0.75% and 1.00%. The .50% rate increase was the largest rate hike since the turn of the century.

In a statement released by the Federal Open Market Committee (FOMC), the Fed emphasized that it would continue targeting a 2% inflation level.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” the FOMC wrote. “With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong.”

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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