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Rising Expenses Have Consumers Feeling Pinched
So while consumers may see higher debt charges now as just another rising expense, the Fed regards them as necessary medicine to prevent the worse disease of broader, persistent inflation, like the kind that reached into double digits in the 1970s. After all, last year's consumer price index rate was the highest in five years.
Fed policy, however, can't control the price of oil, which is set by global markets largely on the basis of supply and demand. To better gauge what's happening in the rest of the economy, economists look at so-called core price measures, which exclude food and energy, for a sense of underlying inflation. The core CPI rose 0.3 percent in March, the fastest pace in a year, and is up 2.1 percent over the past 12 months -- a rate considered low by historical standards.
In a strong economy with low unemployment and rising income, many households can afford to absorb some rising costs.
Most homeowners -- about 83 percent -- don't have to worry about rising mortgage rates because they have either no mortgage or a fixed-rate mortgage, said Doug Duncan, chief economist of the Mortgage Bankers Association. That leaves 17 percent with adjustable-rate mortgages who may see their monthly payments climb, though many of these loans have fixed rates for two or more years.
Also, millions of Social Security recipients and federal retirees receive an annual cost of living adjustment, or COLA, that boosts their monthly benefits to cover inflation. And federal employees and retirees, and spouses of deceased fed retirees, have health insurance. This is a boon for the Washington area, which has more than 400,000 federal retirees and surviving spouses of deceased retirees.
"We're not pinched," said Charlie Kearney, 71, of Rockville, who managed a federal budget office before he retired 20 years ago. With no commute to work and with a wife who is semi-retired from teaching, "the gas thing is more an annoyance than a real pinch, because we don't do that much driving."
Kearney said their home heating bill rose by about $130 a month last winter. He knows a bigger electric bill is looming. He expects their property taxes to jump when their house is reassessed. And he pays 14 monthly bills today, compared with seven two decades ago. But he has a pension, health insurance and a house that is almost paid for. "We're not hurting."
But for workers such as Haydee Rivera, the math is tougher.
She earns $10.70 an hour at her job. Her husband is a restaurant worker. She used to spend $100 for a week's worth of groceries. Now the family of seven, which includes her mother, spends that much every three days.
But what really galls her, she said, are the boys' shoes. She had braced herself to buy a $50 pair for her 12-year-old son, but he wanted the $80 style, she said, shaking her head during a recent lunch break.
"Everything is too expensive today," Rivera said. "It's a lot of money."