If you're a Black or Hispanic consumer and you feel like your pain is worse during this bout of soaring inflation, you might be right, according to new research from the Federal Reserve Bank of New York.
In the 12 months to May, consumer inflation surged to a 40-year high of 8.6%, and gas prices have climbed to record highs. Consumers across the board have felt squeezed, but maybe not more so than Black and Hispanic consumers, who tend to spend more in categories that have seen some of the highest inflation rates.
"When overall inflation began rising in March 2021, inflation disparities surged, with Black and Hispanic Americans experiencing higher inflation than the national average and Asian Americans experiencing lower inflation," the report said. "These disparities are more than twice as large as those observed during 2019."
Who is hurt by inflation? How the Fed broke down the data
Since the Bureau of Labor Statistics' consumer price index report breaks down inflation rates only by categories, researchers used information from the government's Consumer Expenditure Survey on what different demographics spend their money on to create a basket for each group.
Researchers then applied weighted average inflation estimates of the components of the consumption basket for each demographic group. They found Hispanics were experiencing 0.6% worse inflation than average and Black people are experiencing 0.2% worse inflation than average.
While this provides a glimpse of the inequalities created by inflation, it likely still underestimates the disparities between groups.
"In addition to consuming different bundles of goods, different demographics likely face different prices for the same goods, with less advantaged demographics facing higher price growth," the report said.
What are the differences in spending patterns?
Based on 2019 data, Black consumers spend relatively more on transportation and housing and relatively less on food and entertainment than whites.
Used car inflation last year tipped 40%, though that's come down sharply to around 16% now. And rents have surged since the government lifted its rent moratorium last year. Redfin said the median monthly rent in the U.S. surpassed $2,000 for the first time in May, rising 15.2% from a year earlier to $2,002.
Meanwhile, food inflation was 10.1% in the 12 months to May, the statistics bureau said.
Why is this important?
The Federal Reserve has a dual mandate: maximum employment and price stability. The Fed focused last year on recovering jobs lost during the pandemic and let inflation run hot because it thought inflation was "transitory" due to supply factors that would work themselves out once economies fully reopened.
That helped employment rates, generally and for less advantaged groups, climb nearly back to their pre-COVID-19 levels, with employment gaps for Black and Hispanic Americans close to multidecade lows.
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But now, inflation has risen sharply overall and especially for Black and Hispanic Americans, and researchers said the Fed should take note.
"These facts are important to consider in pursuing a monetary policy that strives for maximum employment and price stability for all Americans," the researchers said. "The ways in which different demographic groups experience inflation and the Fed’s response to it will be an important issue."
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at email@example.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: High inflation hurts Black and Hispanic people most, NY Fed study says