Inflation tightens economic squeeze

The prices of gas, food, and most other goods and services rose by 8.6 percent last month from 12 months earlier. Friday’s news from the U.S. Labor Department defied Americans’ hopes that inflation would slow its breakneck climb once the Federal Reserve started raising interest rates.

Why isn’t inflation slowing down? Consumers have not been able to rein in spending on food and energy as costs skyrocket. Prices at the pump are averaging nearly $5 a gallon nationally and closing in on the inflation-adjusted record of around $5.40 reached in 2008. Meanwhile, Americans are still forking over cash for airline tickets, restaurants, and hotels, and credit card debt is increasing. The Fed plans to continue hiking interest rates in hopes of slowing spending. Excess inventory at some major retailers such as Target and Walmart could signal that demand for goods might lessen soon.

Dig deeper: Listen to Joshua Schumacher’s report on The World and Everything in It podcast about how inflation is affecting small businesses.