The inflation rate for December 2022 showed a significant increase of 6.0% compared to the same period in the previous year. When looking over time, The inflation rate on the Island seems to be slowing down, which may suggest that it will return to normal levels in the coming future.
This increase was seen across all major categories, with consumers feeling the impact particularly in the Food and Beverages component which rose by 11.0%. The subcomponents of this category also saw significant hikes, such as cereals (14.2% year-over-year), fruits and vegetables (22.5%), and fats, oils, and dressings (20.8%). The transportation component also saw a noticeable increase of 10.2%, with notable hikes in motor fuel (29.8%) and public transportation (29.5%).
To control inflation, the Federal Reserve uses the Federal Funds Rate, which is the interest rate at which banks lend and borrow money overnight. The central bank can raise the rate to slow down the economy and reduce inflation or lower it to stimulate the economy. The federal funds rate has a major impact on overall interest rates, influencing consumer loans, mortgages, and other forms of borrowing.
On February 1st, the Federal Reserve will announce whether the federal funds rate will remain unchanged or be adjusted.