Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
Main Topic: The current state of inflation and its impact on prices
Key Points:
1. Price increases have started to decrease from the highs experienced during the pandemic.
2. Some goods and services have steadily increased in price over the course of the pandemic.
3. The U.S. is unlikely to return to pre-pandemic price levels in the near future.
### Summary
Former Toys "R" Us CEO Gerald Storch warned that the economy is likely to face a difficult holiday season due to persistent inflation. Other economic stresses such as rising interest rates, credit card debt, and student loans are also contributing to consumer difficulties.
### Facts
- Inflation remains sticky despite the Inflation Reduction Act that was passed a year ago.
- Sales of physical products have been declining for 11 consecutive months when adjusted for inflation.
- The July consumer price index (CPI) rose 0.2%, with prices climbing 3.2% from the same time last year.
- Pulte Capital CEO Bill Pulte suggests that the economy is in a period of stagflation with low growth and high inflation.
- Shelter costs, accounting for 40% of the core inflation increase, rose 0.4% for the month and are up 7.7% over the past year.
- Americans are spending $709 more per month on everyday goods and services compared to two years ago.
- Consumers are shifting towards value retailers in response to inflation.
- President Biden acknowledges that the Inflation Reduction Act was not solely aimed at reducing inflation but rather focused on generating economic growth.
Consumer prices in the US rose 0.2% from the previous month, and 3.3% annually, indicating persistent high inflation and posing a challenge to the Federal Reserve's efforts to curb it; core prices, which exclude food and energy, also increased 0.2% from the previous month and 4.2% from the previous year.
The latest inflation data suggests that price increases are cooling down, increasing the likelihood that the Federal Reserve will keep interest rates unchanged in their upcoming meeting.
The Federal Reserve's preferred inflation gauge increased slightly in July, suggesting that the fight against inflation may be challenging, but the absence of worse news indicates that officials are likely to maintain interest rates.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
The article discusses how the rate of inflation has impacted processors, distributors, and other middlemen, with some benefiting from price increases but now at risk of a slowdown.
Bond traders are anticipating that the Federal Reserve will continue with interest-rate hikes, and next week's consumer-price index report will provide further insight on how much more tightening may be required to control inflation.
Inflation is expected to rise in August as oil and gasoline prices increase, putting pressure on the economy and potentially leading to higher interest rates and a stronger dollar.
Mortgage rates have slightly decreased from their peak in late August, but future trends will depend on the economy and inflation rates, with potential decreases if inflation slows and the Federal Reserve stops increasing its benchmark rate.
Americans are expecting high inflation to persist over the next few years, with a median expectation of 3.6% one year from now and estimates of around 3% three years from now, according to a survey by the Federal Reserve Bank of New York. This suggests that sticky inflation may continue to be a concern, as it surpasses the Fed's 2% target. Consumers also anticipate price increases in necessities such as rent, gasoline, medical costs, and food, as well as college tuition and home prices.
Investors and the Federal Reserve will have to wait for inflation to return to acceptable levels, as the Consumer Price Index report for August 2023 shows consumer prices rising at half the pace compared to a year ago, despite a jump in gas prices.
Goldman Sachs predicts that the August consumer price index (CPI) will show a 3.58% annual increase, with a decline in used car prices, higher airfares and transportation prices, and stable shelter inflation.
The latest inflation report is expected to show a steady increase in consumer prices, with economists predicting a 3.6% overall inflation compared to last year, indicating that inflation is gradually coming down but still remains above the Federal Reserve's target.
The release of the US Consumer Price Index (CPI) for August is expected to impact the crypto market, particularly Bitcoin, depending on overall financial market volatility and whether core CPI surprises to the upside or downside.
U.S. consumer prices are expected to have increased the most in 14 months in August due to rising gasoline costs, while underlying inflation is forecasted to remain moderate, potentially prompting the Federal Reserve to keep interest rates steady.
Despite a spike in gas prices, the rise in inflation appears to be easing gradually, with core prices exhibiting a slower increase in August compared to July, suggesting that price pressures are being brought under control.
Gas and housing prices continue to rise, leading to a 0.6% increase in the federal consumer price index for August and a 3.7% increase for the year, causing concerns about overall inflation and its impact on household budgets.
Despite claims by the Biden administration and corporate media that inflation is decreasing, the latest consumer price index from the Bureau of Labor Statistics shows that Americans paid 3.7 percent more for basic consumer items in August compared to the previous year.
Cryptocurrency prices remained stable as inflation in the U.S. surpassed economists' expectations, with Bitcoin trading at around $26,100 and Ethereum experiencing a slight dip of 0.5%. The Federal Reserve will consider this report, among other factors, for its upcoming interest rate announcement on September 20. While inflation has decreased since June, it still exceeds the Fed's target of 2% annually. Core inflation, excluding volatile food and energy costs, decreased to 4.3% in August compared to July's 4.7%.
Inflation in the US accelerated for the second consecutive month in August due to rising costs of rent and gasoline, with the consumer price index rising 0.6% from the previous month and 3.7% from the same time last year.
US wholesale prices increased at a faster pace in August, indicating that inflation remains persistent despite interest rate hikes by the Federal Reserve.
The Consumer Price Index (CPI) for this month shows that core CPI and all items CPI were slightly above expectations and accelerating, with the primary contributors to the acceleration being core services ex housing and energy, which may be a concern for the Fed. Additionally, owner's equivalent rent was a significant positive contributor to the monthly change in CPI, while used cars and trucks had a negative impact. There is potential for a re-acceleration of inflation, which could have negative implications for equity markets.
Consumers' inflation expectations have reached the lowest level since March 2021, with expectations of a 3.1% rise in prices over the next year, according to new data from the University of Michigan, signaling a positive sentiment for the Federal Reserve's fight against inflation.
Despite elevated inflation, the Federal Reserve is not expected to lower interest rates soon, causing the Consumer Price Index to rise significantly and impacting mortgage rates and home prices.
Health insurance inflation is difficult to measure due to the variations in quality and benefits among different policies, but the Bureau of Labor Statistics indirectly calculates it based on health insurers' profits, which will result in a rise in health insurance prices in the Consumer Price Index (CPI) starting in October 2022, potentially impacting inflation rates and Federal Reserve decisions on interest rates.
Economists predict that Canada's inflation rate is likely to increase to around four percent in August, mainly due to higher gasoline prices, reversing the previous progress made.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
Australian consumer inflation grew as expected in August, driven by surging energy and housing costs, raising speculation that the Reserve Bank may need to further increase interest rates.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
The Federal Reserve's preferred inflation indicator, the personal consumption expenditures price index excluding food and energy, rose less than expected in August, suggesting progress in the central bank's fight against higher prices.
Consumer spending in the US increased by 0.4% in August, while core inflation fell below 4.0% for the first time in over two years, potentially reducing the likelihood of an interest rate hike by the Federal Reserve.
Higher gas prices drove an increase in an inflation gauge tracked by the Federal Reserve in August, but measures of underlying inflation slowed, suggesting overall price pressures are moderating and raising the likelihood that the Fed will leave interest rates unchanged in its next meeting; however, the combination of higher gas prices and sluggish income growth may weaken consumer spending and mark a slowdown from last summer's healthy pace of spending.
Consumers perceive inflation as much higher than official figures indicate at the moment, largely due to sharp increases in the price of things like restaurant dining, hotel accommodation, and gasoline.
Underlying US inflation is expected to rise, supporting the idea that interest rates will need to remain higher for a longer period of time, as indicated by central bankers.
The Reserve Bank of India (RBI) expects consumer price index (CPI) inflation to ease below 4 percent in fiscal 2024-25 if there are no further shocks and a normal monsoon, with the central bank rethinking rate cuts only if CPI inflation remains at or below 4 percent on a durable basis.
The September CPI report is expected to show that inflation remains above the Fed's target, increasing the likelihood of a rate hike and raising inflation expectations for 2023, potentially leading to further upside risk to rates from Treasury auctions.
The upcoming Consumer Price Index (CPI) report for September is expected to show cooling core inflation despite a rise in headline inflation, with the Federal Reserve closely monitoring the data to assess whether inflation is moving closer to its 2% annual goal.
