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Monday, September 26, 2022

Consumer Prices Continue To Climb Steeply Even As State Stimulus Check Start Rolling Out

Americans remain under intense pressure as the forces that have kept inflation elevated for months at a stretch remain active. It will prove an intense challenge to households in the absence of federal stimulus checks even as households struggle to keep pace with rising prices.

The White House and the Federal Reserve struggle to put the economy on a steady path while for the common man it is a fight to shoulder rising expenses.

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Annual inflation eased off a bit in April from the previous steep climb but the consumer price index continued to increase and at 8.3% has proved to be too much for the low and middle-income groups. A separate indicator that subtracts fuel and food costs has accelerated.

The core inflation figures, excluding costs for gas and groceries, has gone up 0.6% month-over-month in April, more than the 0.3% increase in March. This measure is particularly vital for policymakers as it helps them accurately determine which way the economy is headed.

The letup in the annual rate of inflation is too minuscule to be a cause for comfort and the overall picture remains a matter of grave concern. Policymakers have a long way to go before they can bring down rising prices to a more stable and normal level. The rate of inflation remains at its fastest pace in over 4 decades. The re-acceleration exhibited in the core inflation figures is quite unwelcome at this stage.

Reining In Inflation Rate Will Be Painful For Low Income Groups In Absence Of Stimulus Check

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 The fact that high inflation has been sustained for so long is a cause for worry about the central bank. After a complete year of unusual swift increase, household and investor expectations for price changes in the future had been naturally higher. This could perpetuate inflation if businesses and households adjust their behavior and demand bigger raises and charge more for services and goods.

By raising interest rates, the Federal Reserve hopes to weaken spending, demand, and hiring. This should help the supply to catch up with an inflated demand and rein in prices to a large extent. As the economy balances out, inflation hopefully will inch down.

Central bankers are trying to ensure that federal policies temper economic growth but do not lead to further unemployment or plunge the nation into a recession. What they are trying is to engineer a soft landing. And that is something that bank officials admit will not be easy. They acknowledged that some economic pain will have to be inflicted to tackle the high inflation rate.

If the economy reaches a stage where inflation remains unacceptably high, price increases in certain areas will have to be tackled head-on.

Price increases continue to plague consumers in the essential items. Food costs are up 0.9% in April over the previous month, the 17th consecutive increase month-over-month.

The increase has been driven by an increase in the price of eggs, non-alcoholic beverages, and dairy. This is especially hard on the poor and will have to be closely monitored over the next several months and also quarters.

Controlling The Consequences Of Inflation Through State Stimulus Checks

Consumers continue to be haunted by the high rate of inflation that has been sustained for the past three quarters. The price of essentials including gas and groceries continues to increase the most. While the federal administration tries to rein in the rate of inflation through policy measures, states have stepped in to directly help out residents in the absence of federal stimulus checks.

Several states have already committed or have dispatched one-off payments to taxpayers. Some states are planning to provide stimulus to at least some of their residents.

Legislation has been passed in Tennessee, Maine, California, New Mexico, Maryland, Florida, and Georgia to give stimulus checks to various groups like teachers and health workers. Stimulus checks are also being given to all residents based on their income in some states.

For most states, the sole requirement is that residents should have filed their 2021 income tax returns and meet income eligibility.

Stimulus Checks Based On States

Residents of California with a federal adjusted gross income of $75,000 in their 2020 returns received the second Golden State stimulus check of $1,100 max. But inflation has been particularly hard on residents as California’s gasoline prices are the highest in the nation based on several factors.

To counter the high gasoline prices, Gov. Gavin Newsom has proposed a $400 gas card for vehicle owners registered in the state. Each family will receive a maximum of two cards. Residents not owning cars will receive a transit card enabling them to commute for free or pay very low fares in public transport systems.

In Maine, a one-off stimulus check worth $850 will be sent out this month to those who have already filed their tax returns for 2021. People who have filed their returns will automatically receive these stimulus checks and will not have to take any further action in this regard.

Only residents earning $100,000 as individuals are eligible to receive the stimulus check. Around 858,000 people will get the state stimulus checks.

New Mexico will roll out tax legislation this year and will provide a refund stimulus check worth $250 for individual filers and double that at $500 for married couples who file jointly.

Hawaii has passed legislation allowing a $300 stimulus check for residents who have an AGI of less than $100,000 and a $100 stimulus check for the rest.

Federal Stimulus Checks For Homeowners

Homeowners across America will be entitled to financial relief from the Treasury Department through the Homeowner Assistance Fund. The HAF seeks to ward off any chances of defaults and delinquencies, forced foreclosures, forfeiture of energy, and other utility services.

It will prevent the displacement of homeowners who experience financial hardship after January 21, 2020, according to details released by the Treasury Dept. on its website.

HAF funds may be used to assist in insurance for homeowners, payment of mortgages, and payment for utilities and other specified purposes. The law will prioritize homeowners who have faced the greatest hardship and will leverage national and local income indicators to maximize the impact of the fund.

The HAF funds are part of the American Rescue Plan Act signed by President Biden in March 2021. $9.961B has been reserved for homeowners and each state has received sums proportionately, with a minimum of $50M.

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