Latest Inflation Numbers and Discussion

[Gumby]

Ours is still around $4 too, but we are paying a extra carbon tax for all of you global polluters in the other states.

I wouldn't feel too virtuous. We here in New England are downwind of virtually everyone in the country, so no matter how hard we try we can't really improve the air.

 

[ShokWaveRider]

My first car loan in 1981 was 21%. My first mortgage in 1993 was 8.375%. So I have limited sympathy for borrowers.

I am with you. Our first mortgage in the USA was 11% and the home price was $470k (In California). When we first move to Canada (with no interest deduction) before coming to the USA it was 16% for the first year. So, when folks tell you that homes were a lot cheaper then than now, it is all relative. My opinion is, if you cannot afford the mortgage, you cannot afford the house. As it is you get a tax deduction on the interest, what more do they want.

 

[cyber888]

Inflation is tapering off from where I stand. Our regular gas is below $3.00 = around $2.90s
18 brown caged chicken eggs $4.55. These eggs were $8.99 last year. But that was the Avian flu.
The 4 pack Costco low-sodium Bacon I buy was $19.95 last year and now $15.95.
I think Jerome Powell's 3 Rate cuts can happen.
To be conservative, I say 2 rate cuts total to 0.50 will happen.
There's a strong lobby among people in the Mortgage industry to lower it so there's no housing depression. I paid 8.25% for my mortgage 25 years ago, but the younger generation are use to 3% - 5%.
I just saw former Fed Clarida on Bloomberg a few minutes ago saying 3 cuts will still be restrictive. He supports Jerome Powell's plan.

 

[cyber888]

Makes it easy to cut back on chips when they are costing several dollars a bag, which is mostly air. I only buy now if there's a significant sale price - like $1 to $2.

True. I eat a few chips as a "side" to my tuna, chicken, or burger sandwich for dinner. I normally don't eat it as a stand alone snack.

 

[Koolau]

Ours is still around $4 too, but we are paying a extra carbon tax for all of you global polluters in the other states.

Sorry about that. Maybe time to change your legislators??

 

[Fermion]

Sorry about that. Maybe time to change your legislators??

Our legislators famously (infamously?) made a quote "All the votes I need in this state I can see from the Space Needle"

Unfortunately, we live nowhere near there.

 

[Koolau]

Our legislators famously (infamously?) made a quote "All the votes I need in this state I can see from the Space Needle"

Unfortunately, we live nowhere near there.

Well, there IS still another option to change your legislators. And then you will live even FURTHER from the Space Needle! My gut tells me that one "good" carbon tax will lead to another, but YMMV.

 

[MichaelB]

The BEA released the revisions to the 3Q GDP estimates. This includes PCE, which is the Fed’s preferred measure if inflation. Both were revised down, PCE for 3Q was 2.6% (annualized) and core PCE was 2%.

In effect, the Fed inflation target has been reached. Release here https://www.bea.gov/news/2023/gross...-corporate-profits-revised-estimate-and-gdp-0

The price index for gross domestic purchases increased 2.9 percent in the third quarter, a downward revision of 0.1 percentage point from the previous estimate (table 4). The personal consumption expenditures (PCE) price index increased 2.6 percent, a downward revision of 0.2 percentage point. Excluding food and energy prices, the PCE price index increased 2.0 percent, a downward revision of 0.3 percentage point.

 

[jm67]

Well, there IS still another option to change your legislators. And then you will live even FURTHER from the Space Needle! My gut tells me that one "good" carbon tax will lead to another, but YMMV.

Or you could avoid the tax by conserving energy.

 

[pb4uski]

Everyone likes their own "war" I guess.

You are hopefully seeing that such a viewpoint is largely self-interest. People who don't plan to get a mortgage are fine with hire mortgage rates. People who weren't savers are fine with low interest rates.

Truth is both have advantages to some extent in the economy, but lower interest rates are pro-growth generally speaking and therefore best overall for most folks.

I understand what you are saying but we'll agree to disagree. I think normal interest rates are the best overall for most folks. As an equity investor, you have your own bias.

Why not just normalize interest rates near to their historical averages? That would be fair to both savers and borrowers, whereas abnormally low interest rates are beneficial to borrowers (and perhaps investors) but detrimental to savers and vice versa.

BTW, while I would benefit from normal interest rates compared to 2008-2022, I also paid normal mortgage rates during my working years (higher than 2008-2022).

 

[Closet_Gamer]

This is a good thread.

I'm with pb4uski and other who say hold rates steady. There is no compelling financial case to move them in either direction right now.

And I do think that re-normalizing expections for both consumers and businesses to rates that are similar (or even a bit higher) than they are today is a good thing. Businesses must have a real hurdle rate to clear or zombies will wander endlessly. Higher interest rates should simultaneously help lasso home prices and provide much more stability to people saving for/in retirement.

Cheap debt has fueled price growth for everything -- cars, homes, college, stocks. It punishes young people far more than interest rates.

If we could hold asset prices flat-ish while allowing the economy/wages to grow into the recent inflation that would be great for my daughters who are just about to embark into adult life. It pains me that both of them are poised for very good paying jobs but will be staring at huge climbs to get to a 20% down payment on a home. I'd much rather they can get to 20% more quickly but then have to pay a higher, but amortized, mortgage.

 

[Aerides]

Why not just normalize interest rates near to their historical averages?

I would be happy with a world where interest rates hovered around 4%. Good for savers and borrowers, a middle ground.

But since it's pretty much the only lever the Fed has to balance for Inflation and UE, I don't see it becoming a fixed thing. Also people would roar that it was fixed even if it benefited them.

 

[Chuckanut]

Or you could avoid the tax by conserving energy.

Ah… a joke! I get it.

I live int he same state. I bought a hybrid a few years ago. My reward for conserving energy was to have a $75 fee added to my yearly tags. The fee is to help build out a state charging system I can plug my hybrid into. No, I don’t drive a plug-in hybrid. It’s primarily about raising revenue, not climate change or conservation.

 

[Gumby]

Ah… a joke! I get it.

I live int he same state. I bought a hybrid a few years ago. My reward for conserving energy was to have a $75 fee added to my yearly tags. The fee is to help build out a state charging system I can plug my hybrid into. No, I don’t drive a plug-in hybrid. It’s primarily about raising revenue, not climate change or conservation.

How much gasoline tax have you avoided? At $0.494 per gallon, I bet it more than covers the extra tag fee.

 

[Fermion]

I just feel sorry for the people in Washington state who make $35,000 a year and have to commute 15 to 30 miles to that.

They don't really benefit from a $7500 tax credit on a EV that can do 0 to 60 in 9 milliseconds and the extra $0.50 a gallon actually means something to them.

I guess they can conserve energy by turning down the thermostat to 50 during the winter though, so there is that.

 

[GenXguy]

Yes, hold rates up there. It looks like core PCE will be 3.3% year over year, so we're still way above the 2% rate that the Fed targets for core PCE, so it's definitely too early to be cutting rates when we are about to see new inflationary pressures. We can't read too much into the noise of short term changes/blips. Also, the last figures I read on services inflation were still close to 6%!

After inflation has run super hot for so long, I would actually like to see it run extra cool for years to come to help offset just a bit of the very high inflation we've had in recent years.

 

[MichaelB]

Yes, hold rates up there. It looks like core PCE will be 3.3% year over year, so we're still way above the 2% rate that the Fed targets for core PCE, so it's definitely too early to be cutting rates when we are about to see new inflationary pressures. Also, the last figures I read on services inflation were still close to 6%!

After inflation has run super hot for so long, I would actually like to see it run extra cool for years to come to help offset just a bit of the very high inflation we've had in recent year.

Core PCE is on a strongly downward slope. The last 5 quarters have been 5.0%, 4.7%, 5%, 3.7% and 2%. The last 2 quarters, at 3.7% and 2%, show it is a sustained decline, and the next reading will likely come in under 2%. At some point you need to acknowledge PCE inflation is at or close to the Fed target and it’s time to move on.

Years of “extra cool” inflation would indicate a return to the economy we had in the preceding decade. The US economy, which right now is driving global growth, would sputter and “war in savers” would be back and in full force. It would have negative consequences for just about everyone.

 

[Chuckanut]

How much gasoline tax have you avoided? At $0.494 per gallon, I bet it more than covers the extra tag fee.

It’s a disincentive to the purchase of cars that use less fossil fuel which is supposedly what we are aiming for. I like the 500+ mile driving range of my hybrid, but from an economic point of view the $75 dollars a year more to license it, just stretches out the break even point.

Anyway, I could fill up a screen with other reasons, but this is off topic, so I’ll leave it at that.

 

[JackJester]

I live in WA and this comment from Fermion perked my interest so I did some quick investigation.

Ours is still around $4 too, but we are paying a extra carbon tax for all of you global polluters in the other states.

I don't think our WA state gas tax of 49.4 cents per gallon has changed based on the recently passed carbon tax (i.e., "the Climate Commitment Act.")....which is the following:
Under the Climate Commitment Act passed earlier this year (2022), Ecology must set up a cap-and-invest program by 2023. That program will set a statewide cap on greenhouse gas emissions, .....

The law requires businesses and organizations that produce more than 25,000 tons of greenhouse gases a year to obtain emissions allowances for their total emissions. (they buy these "allowances" at an an 'auction').

There was some political falsehoods spread regarding this tax though: No, Washington is not adding an additional 46-cent gas tax in 2023
https://www.krem.com/article/news/v...alse/293-aa0ee04b-c87c-4986-a459-11ac8f8579a7

Most likely these extra 'auction' costs for high carbon businesses are passed on to consumers (e.g, more expensive milk from Darigold), but that is not part of our Gas tax. Furthermore, while I hate paying $4+ for gas in WA just like anybody, our gas tax is not the primary contributor. Some other factors are in play... supply chain, price gouging, ? .

.....according to the U.S. Energy Information Administration, the Washington State and federal gas tax of $0.7078 is the 5th in the country, behind Illinois ($0.858), California ($0.835), Pennsylvania ($0.806), and Indiana ($0.723), as of Feb. 2023.

Our 49.4 cent baseline state gas tax has been on the books since 2017 and hasn't increased.

Now, OTOH, if you want to talk about our ridiculously large Property taxes in WA state I'm all ears.

 

[Fermion]

I live in WA and this comment from Fermion perked my interest so I did some quick investigation.

Investigate a bit more, I think you missed something.

Or maybe you thought the oil companies would just pay the extra $$ out of their own pocket as kind of a goodwill gesture?

 

[GenXguy]

New - Global inflation warning - related to shipping:

https://www.cnbc.com/2023/12/21/con...freight-inflation-soars-in-red-sea-chaos.html

 

[Montecfo]

More good news

The PCE deflator fell 0.1% in November and increased just 2.6% annually, which was less than expected.This was the headline number.

The Fed's favored inflation gage, so called "core" PCE, which strips out volatile food and energy prices, was at 1.9% for the past six months, essentially a bit below the Fed's 2% target. The annual figure was 3.2%, again less than expected.

According to sources, further declines in rent are in the pipeline suggesting the push to a full year figure at 2% is in view.

It is excellent inflation news.

Fed's favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected

https://www.cnbc.com/2023/12/22/pce-inflation-november-2023-.html?__source=androidappshare

 

[Gumby]

Oh, the Eeyore's are going to be mad about that.

 

[Montecfo]

No doubt .

 

[GenXguy]

PCE core comes in at 3.2% year over year. When this year over year figure drops to the Fed target of 2%, or preferably less, I'll be partially satisfied, but I would like to see the opposite of what they did before, when they let it run hot for too long. We need lower inflation to make up for the excess we've had in these last few years. 3.2% is still 60% too high. The Fed's work isn't over - there are inflationary pressures at work ahead.