Since 2021, Hispanic and Black Americans experienced slightly higher rates of inflation compared to white or Asian Americans, finds new research from the New York Fed.
Why it matters: The headline inflation number in the Consumer Price Index — which is at a super high 8.6% right now — is an average, and doesn’t reveal much about how different households experience rising prices. There are real differences across income groups, or between rural and urban dwellers, for example.
- “Inflation varies depending on your spending habits,” as this NYT piece noted in May. Drivers face higher costs because of soaring gas prices. And renters see the cost of housing rise more compared to those with a stable mortgage payment, who now pay less in real terms each month.
There’s less information out there about how different racial and ethnic groups experience inflation, however. The NY Fed research is a first step.
Methodology: The CPI doesn’t track inflation by demographic group, so the researchers used the Bureau of Labor and Statistics’ Consumer Expenditure Survey, which tracks spending patterns in different households, by race and ethnicity.
They re-weighted the CPI data based on those patterns, which help explain the differences in inflation rates:
- Broadly, speaking Hispanic Americans spend a bigger chunk of their money on transportation — buying cars and filling them with gas. Those categories saw huge price spikes over the past year.
- Meanwhile, Black Americans spend relatively more of their money on housing. With far lower rates of homeownership for Black and Hispanic households, it’s perhaps not surprising that housing prices would be a bigger factor.
- Asian and white Americans spend a slightly higher proportion of money on education, which saw lower price increases.
- The actual gaps are likely even higher than these estimates, the researchers write.
Caveats and to-be-sures: These are averages, and like I said up top — averages obscure differences.
- There is diversity within these groups, too — between say, a Black person living in a city or a rural area.
Zoom out: Nearly two years ago, the Federal Reserve announced it would be more inclusive when it comes to monetary policy. At the time, the focus was on the unemployment rate — the idea was to pay attention to jobless numbers across demographic groups, rather than just the overall number, in making monetary policy decisions.
- The research in the NY Fed’s paper is within that umbrella — another way for monetary policymakers to understand how different groups are experiencing the economy.
- “These facts are important to consider in pursuing a monetary policy that strives for maximum employment and price stability for all Americans,” the researchers write in a post published yesterday.
Currently: As higher inflation rates were broadening racial disparities, the story was completely different for the unemployment rate. Gaps between Black and white Americans have narrowed in the tight labor market.
What’s next: Expect more research on how inflation impacts other groups to come.