US Postal Service chief warns of the impact of inflation

WASHINGTON (Reuters) – U.S. Postal Service Director Louis Dejoy said the agency is dealing with significant inflation costs as it works to stem losses, acknowledging that higher costs will put more pressure on stamp prices.

Dejoy told Reuters in a 90-minute interview late on Wednesday that the US Postal Service is feeling the impact of rising costs as it works on its plan to get rid of $160 billion in expected red ink over 10 years.

“Inflation is much higher than we expected in the plan,” Dejoy said. “I think we’ll incur $1.8 billion more this year in unplanned inflation.”

For the year ended September 30, the USPS reported a net loss of $4.9 billion in revenue, of $77.1 billion and $82 billion in expenses. The USPS is expected to provide more details on the effects of inflation when it reports on financial results on May 5.

Earlier this month, the USPS filed a notice with the Postal Regulatory Commission to raise prices of first-class postage stamps from 58 cents to 60 cents and raise overall prices for first-class mail by about 6.5% — after postage stamps rose 3 cents in August.

The USPS noted that the price hike was below the 8.5% annual inflation rate.

DeJoy, who cited issues such as transportation and labor costs, was outspoken about the expected impact of inflation and the need to keep prices high.

“I’m very frank about it — we’re raising prices. And whether I run out of cash tomorrow or three years from now, I still have a plan to run out of cash with an organization of 650,000 people,” DeJoy said.

The USPS won nearly $50 billion in financial relief from Congress under legislation signed by President Joe Biden this month. DeJoy says he still needs to shed $35 billion to $40 billion in costs and increase revenue by about $25 billion over a decade to meet the financial goals.

“The ball is in our court now – we have a lot of work to do,” said Degwe.

Struggling with decreasing mail volume despite having to deliver to a growing number of addresses, the USPS has reported net losses of more than $90 billion since 2007. In February, it posted a quarterly net loss of $1.5 billion.

(Reporting by David Shepardson in Washington; Editing by Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.