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.
### 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.
### Summary
India's inflation data fails to accurately reflect the impact of rising prices on the population due to outdated weights assigned to different categories. The weightage system, based on consumption patterns from 2011-12, does not capture changes in income levels or consumption habits. As a result, the data overemphasizes food inflation and underestimates inflation in sectors such as education and healthcare.
### Facts
- Rising food prices, assigned a high weightage of 45.86 percent, contribute significantly to the overall inflation rate captured by the Consumer Price Index (CPI).
- Inflation in the fuel and light category does not have as strong a relationship with overall inflation.
- The weights assigned to various categories in the CPI are based on the 2011-12 Household Consumption Expenditure Survey, which does not accurately reflect the changes in consumption patterns and income levels over the past decade.
- Consumption patterns have shifted towards higher-cost items like meat, fish, milk, and a wider variety of produce.
- The weightage for medical and educational expenditure needs to be increased, as the share of actual expenditure in these categories is larger than what was measured in the last survey.
- Private schools with higher fees and the growth of the tuition industry contribute to increased overall expenditure on education.
- A comparison between the weights in the CPI and a household's overall expenditure shows discrepancies, with food having a higher weight in the CPI than in actual expenditure.
- The weights assigned to different categories in the CPI should be rebased according to the latest Household Consumption Expenditure Survey to provide accurate inflation data.
Inflation is causing a decline in affordability for average working individuals, with prices on everyday necessities such as groceries, gasoline, and housing rising significantly in the past two years due to government spending and the Fed's money-printing.
The Federal Reserve's preferred measure of inflation, the PCE price index, increased in July, suggesting a higher likelihood of further interest rate hikes this year.
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 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.
US inflation has slowed over the past year and wages are not a reliable indicator of future price increases, according to Federal Reserve officials.
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.
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.
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.
Inflation is expected to fall below the Federal Reserve's 2% target by late next year, despite a recent rise in consumer prices driven by increased energy costs.
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.
August inflation rose to 3.7%, the highest month-to-month increase since June 2022, driven by rising gas prices, which accounted for over half of the rise, while prices for shelter and food remained elevated; however, the Federal Reserve's reaction to the data is uncertain as there are signs of prices moderating but also concerns over inflation remaining too high.
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.
The U.S. inflation rate has been helped by falling medical costs, but this trend is about to reverse, which could complicate the Federal Reserve's efforts to lower inflation back to pre-pandemic levels. The complex way the government measures the rise of medical costs and the fluctuations caused by the pandemic have contributed to the instability in health-care costs. The upcoming rise in health insurance costs is expected to have an impact on inflation, particularly the core rate that excludes food and energy costs. Economists are divided on the extent of this impact and whether it will hinder the Fed's fight against inflation.
Despite expectations of higher interest rates causing a spike in unemployment and a recession, the Federal Reserve's rate hikes have managed to slow inflation without dire consequences, thanks to factors such as replenished supplies, changes in the job market, and continued consumer and business spending.
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 metric, the Personal Consumption Expenditures (PCE) Index, showed slow growth in August, with the core PCE rising by only 0.1% on a monthly basis, suggesting that inflation is cooling and falling in line with the Fed's target.
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.
Summary: This page provides full coverage of the personal income and consumer spending report, including the release of inflation data targeted by the Federal Reserve's monetary policy.
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.
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.
Inflation is causing consumers to find certain expenses, such as fast food, streaming services, childcare, concerts, brisket, lattes, going out drinking, new cars, and health insurance, no longer worth the high costs.
The Consumer Price Index (CPI) report for September 2023 is expected to show a slow increase in prices, with market expectations forecasting a 0.3% increase in core inflation on a monthly basis and 4.1% on a yearly basis, which may lead to stronger market reactions if the figures exceed expectations. Banks such as Morgan Stanley, Goldman Sachs, and Bank of America have provided their predictions for the upcoming CPI report. Analysts suggest that if the core CPI exceeds 0.1% on a monthly basis, it could lead to a decline in the stock market as it may indicate a potential interest rate hike by the Federal Reserve. This data is particularly significant as it precedes the FOMC meeting scheduled for October 31-November 1.
The U.S. government's upcoming inflation report is expected to show a cooling off of inflation, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, and core inflation expected to be up 4.1% from September last year, indicating slower price increases in September than in August.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
The minutes from the Federal Reserve's September policy meeting confirm that the central bank is closely monitoring data on inflation, adding significance to today's consumer prices report; the report is expected to show a marginal decrease in inflation pressures in September, which would be welcome news for the U.S. central bank, although the path to lower inflation and a return to the 2% target remains uncertain due to the potential impact of higher energy prices caused by the Israeli-Palestinian conflict.
The Consumer Price Index (CPI) rose higher than expected in September, causing the price of bitcoin to decline, as the Federal Reserve hinted at the possibility of another rate hike.
The Consumer Price Index rose 3.7% for the 12 months ended in September, with high gas prices and shelter costs contributing to inflation, although food prices matched overall inflation for the first time since early 2022, and underlying inflation trends are moving in the desired direction of the Federal Reserve.
Despite a slight improvement in month-to-month price gains, inflation remains a challenge for the Federal Reserve as prices continue to rise, particularly in areas such as housing and gas, burdening families and straining budgets. The Fed's efforts to control rising costs for gas, groceries, and rent are limited, leaving policymakers searching for effective solutions.
The Core Personal Consumption Expenditures (PCE) Price Index, the US Federal Reserve's preferred inflation measure, is expected to rise 0.3% MoM and 3.7% YoY in September, while markets may overlook the PCE inflation data following the release of the GDP report.
