How soaring inflation forces stark choices Inflation in March was the highest since December of 1981, with prices up 8.5% from a year ago. Rising prices are especially hard on low-income people, who spend more of their money on necessities.

How soaring inflation forces stark choices

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A MARTINEZ, HOST:

President Biden heads for Iowa today to talk about his economic agenda. The trip coincides with a rough inflation report that came out this morning. Now, no one, of course, likes paying more for things from haircuts to hamburgers, but it's a particular hardship for people with little money to spare. NPR chief economics correspondent Scott Horsley joins now to discuss. Scott, the Labor Department gave us an update this morning on how much prices rose in March. How bad was it?

SCOTT HORSLEY, BYLINE: It was not good, but it wasn't really surprising. We knew that gasoline prices had hit a record high in March after Russia's invasion of Ukraine. And that jump in gas prices alone accounted for more than a half of overall inflation last month. Food and shelter prices were also up in March. So even though we got a break in the price of used cars during the month, consumer prices overall rose 1.2% between February and March. Over the last 12 months, prices have jumped 8 1/2 percent. That's the sharpest increase in more than 40 years. So it's a pretty ugly picture.

MARTINEZ: And especially ugly for people whose income is already stretched pretty thin. How is inflation affecting families on the lower end of that income ladder?

HORSLEY: They're getting hit hard. You know, lower-income families have less fat in their budgets to trim. To give you just one example, if you're buying name-brand groceries and the price goes up, you can switch to a cheaper store brand. If, on the other hand, your food budget is already barebones, there's not a lot of room to cut corners. So when the price of groceries goes up, something has to come out of your shopping cart. I've been talking with some people who are especially sensitive to rising prices, and what those conversations reveal is there really isn't just one inflation rate. Everybody has a personal pain threshold. For Laura Kemp, who lives in Muldrow, Okla., it's the electric heating bill that really hurts.

LAURA KEMP: I live in a two-bedroom mobile home. And last year, it was $125. Last month, I got a bill for $306 for my electric.

HORSLEY: Charlene Rye retired after 28 years in the poultry business, much of that time in chicken-processing plants. Chicken prices are up sharply over the last year, like most things in the grocery store. Rye says that's affecting her shopping list.

CHARLENE RYE: You have to be a little more conscious of, you know, how you cook and things you buy.

HORSLEY: And for Terrie Dean, it's the cost of housing that really stings. Dean and her teenage son rely on disability payments of about $1,600 a month. For now, that puts an apartment just out of reach.

TERRIE DEAN: They want first month and deposit, not realizing that that may be all this family brings in. We are currently living in a motel.

HORSLEY: Low-income families typically spend about 45% of their income on housing. That's more than twice the share that wealthier families do. For groceries and transportation, the disparity is even wider. That's why Federal Reserve Governor Lael Brainard says the rising prices for food, gasoline and shelter are especially painful for the poor.

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LAEL BRAINARD: While all Americans are confronting higher prices, the burden's particularly great for those households that have more limited resources. That's why getting inflation down is our most important task, while sustaining a recovery that includes everyone.

HORSLEY: While inflation is the highest it's been December of since 1981, Brainard says even that headline-grabbing figure actually understates the cost for low-income families, since more of their budget goes for necessities, like food and gasoline, that have seen some of the biggest price increases. When inflation eats into a low-income family's spending power, something has to give. For Patricia Bridgmon, who lives in Chicago, rising fuel prices mean fewer trips to see her mom.

PATRICIA BRIDGMON: It's just horrible with the gas. I have a elderly mother in Hammond, Ind. That's about 20, 25-minute drive. And I usually go to see her three days out of a week. Now it's just down to one day because of the gas.

HORSLEY: Gasoline prices have also forced Laura Kemp to cut back on driving. Not only is she paying more to heat her mobile home, but she's not traveling as often to Fort Smith, Ark., about 35 minutes away.

KEMP: I love going to the art museums and thrift store shopping and just getting out, but I can't even go anymore.

HORSLEY: Charlene Rye, the retired poultry worker, has to weigh the cost of driving to a larger supermarket that's farther away or shopping closer to home where prices are higher, even in good times. Rye has gotten some help from a local food pantry, which has seen a surge in traffic as prices have climbed.

RYE: You have to kind of wait in line. They open around 10 o'clock. And if you're there at 9, there's already people in line.

HORSLEY: Rye says most of her retirement savings went to pay medical bills, so she now depends on Social Security payments - about $1,350 a month. Like other retirees, she got a cost-of-living adjustment of 5.9% at the beginning of the year, but that's not enough to keep pace with the actual cost of living. Laura Kemp feels like she's losing ground, as well.

KEMP: By the 10th of the month, I have $200 left after I pay all my bills. The 200 a month now is now going into my gas tank. And I have a cat - got to feed him. And I'm not making it to the end of the month anymore. Even getting a Big Mac now - a Big Mac meal is $8. I can't afford it.

HORSLEY: Kemp says when the weather warms up, she plans to plant a vegetable garden in hopes of defraying her food bill. She's got seeds for tomatoes, zucchini, peppers and eggplant picked out. And she's been eyeing some land her brother owns, land that her mobile home also sits on. In this day and time, she says, you all have to pull together as a family.

MARTINEZ: Wow, Scott, and stories like that really highlight the very real hardship that inflation is causing. How much pressure does this put on the Federal Reserve to just get prices under control?

HORSLEY: The Fed's feeling a lot of pressure right now. March may turn out to be the high watermark for inflation, but even if the cost of living comes down in the months to come, it's still going to be well above the Fed's target of 2%. The central bank did start raising interest rates last month in an effort to tamp down demand. It started slowly, with a quarter-percentage-point rate hike. We know that many members of the Fed's rate-setting committee would have preferred to raise rates by half a point had it not been for the uncertainty surrounding the war in Ukraine. So markets anticipate that we will see a half-point increase at the next Fed meeting in early May. And, A, we could see rates climb significantly higher in the months to come as the central bank tries to bring inflation back under control.

MARTINEZ: NPR's Scott Horsley. Thanks, Scott.

HORSLEY: You're welcome.

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