Economist Jason Furman's belief that higher inflation stimulates investment is mocked by the reality of market dynamics, as evidenced by the fact that successful companies achieve massive valuations by lowering prices and providing more value to consumers.
The U.S. services sector unexpectedly gained momentum in August, with new orders and higher input prices, indicating potential signs of continued inflation pressures.
Economists at the Chicago Fed argue that recent rate increases have brought inflation on a path to 2% without causing a recession, creating a "goldilocks" scenario for risk-taking in financial markets.
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.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
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.
Russia's economy ministry has raised its 2023 inflation forecast from 5.3% to 7.5% due to the impact of the war in Ukraine, and President Putin has acknowledged that high inflation is causing difficulties for businesses.
Inflation in the US is expected to accelerate again, with economists predicting a monthly rise of 3.6%, suggesting that price pressures within the economy remain a challenge in taming high inflation.
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.
Wholesale inflation in the US rose more than expected in August, with the producer price index increasing by 0.7%, the largest monthly gain since June 2022, counteracting recent data that suggested price increases had been slowing down.
Higher-than-expected inflation has triggered a 'reflation trade' in markets recently, but the increases won’t last and investors should take heed.
"Inflation expectations can influence actual inflation, as people's behavior and attitudes towards the economy play a role in price changes," according to Joanne Hsu, director of the Surveys of Consumers at the University of Michigan.
