While some are cautiously optimistic a pause in interest rate hikes could signal relief for consumers’ wallets, others feel the relief from inflation is overdue.
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In its latest meeting, the Federal Reserve left its key interest rate unchanged. The move comes after 11 rate hikes in 18 months, taking aim at soaring inflation. In June 2022, the consumer price index peaked at 9.2%, a measure of the monthly increase in prices that consumers pay.
“Since the end of COVID, it has been seriously ridiculous,” Tim Kiedrowski told News 5 in October 2022.
The co-owner of Kiedrowski’s Simply Delicious Bakery in Amherst lamented the rising costs of many of his key ingredients. Inflation and supply chain issues contributed to higher prices of things like butter, which was $1.30 per pound more than nine months prior.
Nearly a year after our visit, News 5 is following through with Kiedrowski’s to see how the small business is faring.
“We’re just trying to stay afloat, below the water, above the water, and it’s just so very hard to do that,” Kiedrowski said Thursday.
Tim Kiedrowski and his son Michael explained the price of some of the ingredients previously climbing have since leveled off. At the same time, others remain high. Cream cheese, a staple of which the bakery uses 500 pounds weekly in its famous “snoogles” and danishes, has gone up in price by 58%.
They’ve also noticed deliveries tacking on fuel surcharges and delivering less product for the same price. The owners said absorbing higher costs while not passing on too much of the burden to customers has been a balancing act.
“We can only bring the prices up and slim down product buys,” Michael Kiedrowski said.
August marked the highest monthly inflation increase in more than a year. The rise was partly driven by a 10.6% increase in the gasoline index from the previous month. The shelter index also increased for the 40th consecutive month. Overall, the most recent report found food prices increased by 4.9 percent from the previous year.
The price of other goods and services saw more modest increases. Inflation showed signs of cooling in the preceding months before the Central Bank elected not to change interest rates.
“They’re taking a pause here just to wait and see,” said Dr. Bill Kosteas, a Cleveland State economics professor and the dean of the College of Graduate Studies. “It’s not an easy balance to strike. They’re really trying to thread a needle here.”
He said the Fed is monitoring the data and current events. The war in Ukraine could still have an impact on the global economy. And recent and looming labor strikes could pressure employers to raise wages and prices across certain industries.
All scenarios are developing, and it’s likely too early to predict their influence on the Fed’s decisions. Some economists predict rate cuts in 2024, while others expect them to remain high.
“Over the next couple of months, we’ll get a few more data points on what’s happening with inflation. And we’ll start to get a clearer picture, hopefully, of where things are going,” Kosteas said.
He explained the average consumer will feel different effects from interest rate changes, depending on their situation.
“Now you can get a pretty good return on safer assets. So if you’re a saver, that’s great. Now if you’re looking to go out and buy that first home, mortgage rates are high. And if you were kind of on the fence and waiting and saying, ‘Oh, maybe we wait a year to buy that house or get that new car and take out that auto loan.’ Now it’s looking like a year from now, you may not get that relief,” said Dr. Kosteas.
In several months, Kiedrowski’s is preparing to celebrate its 40th year in business. The bakery owners say they’ve weathered economic downturns in the past, and they’re optimistic their loyal customer base will help them survive the current uncertainty.
“I’ve worked very hard over the last 39 and three-quarters years to keep this going and give a good product to people. So yeah, I’m optimistic,” Tim Kiedrowski said.
