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Fed’s Preferred Inflation Gauge Climbs 6.6% From a Yr Earlier

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Demand has remained strong and provide chain disruptions have continued into 2022, making the central bank’s task ahead all of the tougher. The Fed has up to now caused recessions while attempting to weigh down high inflation. Now, officials are constraining the economy just because the war in Ukraine ramps up uncertainty and threatens to maintain prices for gas and other commodities elevated.

“It’s going to be one other extremely long and difficult yr,” Diane Swonk, chief economist at Grant Thornton, wrote in a research note Friday after inflation and wage releases. “Buckle up.”

The outlook for inflation within the months ahead is wildly uncertain. On one hand, the Fed’s pivot on rates of interest has pushed mortgage rates sharply higher, which can begin to weigh down the housing market and funky off related sorts of demand. Already, some corporations — just like the washing-machine maker Whirlpool — are seeing consumer demand wane compared with last yr, though it’s higher than prepandemic levels.

But costs for key inputs proceed to climb, and that will remain the case amid the war in Ukraine and as China locks down key cities to contain the coronavirus. At Whirlpool, higher input prices are prompting the corporate to charge consumers more.

“Historic levels of inflation, notably in raw materials, energy and logistics, will impact us all year long,” James W. Peters, the corporate’s chief financial officer, said Tuesday during a conference call. “Nevertheless, our previously announced pricing actions are on course and position us to totally offset cost inflation as we exit the yr.”

Many products were already struggling to return to normal inventory levels before Russia invaded Ukraine and roiled commodity markets. Cars and trucks, for example, remained in brief supply due to shortages of key parts — most critically, semiconductors. Executives at Ford Motor said this week that the corporate had 53,000 vehicles built but that they were awaiting chips to finish them.

“Customers’ demand is incredibly strong,” Jim Farley, Ford’s chief executive, said in an earnings call on Wednesday. “Nevertheless, we’re still grappling with persistent supply chain issues that prevent us from posting a good stronger quarter.”

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