Inflation needs to be brought under better control before the Federal Reserve starts reversing its monetary policy of boosting interest rates, a Miami-based regional executive with the Federal Reserve Bank of Atlanta said Tuesday, during a regional economic summit at Key Biscayne.
The U.S. Consumer Price Index, or CPI, in February was 6% over the past 12 months, the eighth consecutive monthly drop. Yet, prices need to fall in a greater variety of goods and services, said Shari Bower, vice president and regional executive of the Miami branch of the Fed’s bank in Atlanta.
Although trending down, more than 60% of items in the basket of goods factored into the CPI saw price rises of more than 5% last month, she said, speaking to about 300 people at the South Florida Economic Summit held by the Greater Miami Chamber of Commerce.
“We’re seeing inflation come down for specific items, but not across the board,” Bower said.
In the most recent consumer price information released for cities, the Miami metropolitan area posted the highest cost-of-living increase among major U.S. cities, according to December data released in February by the U.S. Bureau of Labor Statistics. It reflects the tough daily reality for many locals who work outside of technology, finance or law — sectors paying many workers six-figure salaries and head-spinning annual bonuses on top of that.
Consumer prices in the region encompassing Miami, Fort Lauderdale and West Palm Beach rose 9.9% for the 12 months ending in December 2022, the highest figure among the top 14 metro areas. Phoenix came in second place at 9.5% and Seattle in third at 8.4%. New York-New Jersey and the San Francisco Bay Area, two sources of new Miami residents, fared much better at 6.3% and 4.9%, respectively. Miami’s pace of inflation in 2022 also outpaced the national level then at 6.5%.
Bower, meanwhile, Tuesday echoed what her boss Raphael Bostic, chief executive officer of the Federal Reserve Bank of Atlanta, wrote in his latest monthly message. The Atlanta Fed is headquarters for the Federal Reserve’s sixth district, which covers Alabama, Florida, Georgia, and parts of Mississippi and Tennessee.
Bostic wrote before considering reversing the current course of monetary policy, he needs to see: a narrowing of the gap between labor supply and demand, higher interest rates more decisively affecting aggregate demand, ongoing recovery in aggregate supply, reduction in the breadth of inflation, and stable inflation expectations.
Bower said Fed business surveys showed that, “Firms are still paying more for stuff including labor. Thus, they’re charging consumers more.”
Labor remains an issue, too.
While easing a bit, “We’re still hearing from many of our business contacts that labor is still their number one issue — that if they could find qualified people, they would hire all of them today,” she said.
“The labor shortfall is causing wages to increase, which is making it difficult for us to really tackle inflation.”
