Current Inflation Index Reports and Fed Policy/Actions

Sadly, in my area the local inflation rate for the previous year is 4.9%. My CDs/Ibonds/TIPS will struggle to keep up with that after taxes. Maybe I can hitch a ride with some of the local Billionaires and other very big earners who are leaving the state.
 
TripleLindy said:
That feels closer to my perception of inflation. Seems like everything I purchase has increased by at least double digit percentages.
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I saw a comparison of McDonald’s menu pricing recently. Almost everything was up 50% or more.
Keep in mind with some things we have a choice. Other costs, we just have to pay, insurance for example.
Our personal expenditures have overall gone down in the last year. No mortgage, eating out less, shopped our insurance, etc. I may pay more for what I buy, but I will spend less overall. That’s an inflation hedge too.
 
4.3% is close to full employment, so no particular reason to make a change there. 3.8% inflation, slightly elevated but not hot by any means except by comparison to an arguably unreasonable Fed 2% target... suggests standing pat or perhaps preemptively increasing rates to reverse the upward trend. 2.3% projected real GDP.... good enough methinks.

I don't see any reason to do much of anything.

Lower rates will help the government deficit slightly but at the risk of aggrevating inflation which is hard to control once it starts accelerating.

Stand pat.
 
TripleLindy said:
That feels closer to my perception of inflation. Seems like everything I purchase has increased by at least double digit percentages.
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Yes. And it's hard to cut back on spending much to compensate with the biggest ticket items like homeowner's insurance, car insurance, property taxes, and home maintenance/services costs.
 
GenXguy said:
Yes. And it's hard to cut back on spending much to compensate with the biggest ticket items like homeowner's insurance, car insurance, property taxes, and home maintenance/services costs.
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Cost increases in those categories for us amount to just a couple thousand. That’s just a fraction of the mortgage interest I no longer pay.
 
pb4uski said:
4.3% is close to full employment, so no particular reason to make a change there. 3.8% inflation, slightly elevated but not hot by any means except by comparison to an arguably unreasonable Fed 2% target... suggests standing pat or perhaps preemptively increasing rates to reverse the upward trend. 2.3% projected real GDP.... good enough methinks.

I don't see any reason to do much of anything.

Lower rates will help the government deficit slightly but at the risk of aggrevating inflation which is hard to control once it starts accelerating.

Stand pat.
Click to expand...
I agree strictly from a numbers perspective, but they feel different than similar numbers in the past. I saw a report the other day that went under the surface on employment numbers. It said that there are more people under 55 that are unemployed but not seeking employment than ever before. Those people are not reflected in the unemployment numbers, nor are the underemployed, which is a field that is growing rapidly. Lots of senior level software engineers are relegated to what used to be entry level jobs, like QA testing, making it more difficult for inexperienced workers to find employment in their field of training. I guess time will tell.

Same feel with inflation, which I mentioned above. If I was feeling 4-5%, I’d be ecstatic, but everything I’ve purchased recently has had a price increase much higher than that. Large and small purchases.

But those “feelings” are not actionable.
 
I hear the term today I think it was NEET. Not Employed, Educating, or Training. I am not sure if the employment numbers count those.
 
COcheesehead said:
Cost increases in those categories for us amount to just a couple thousand. That’s just a fraction of the mortgage interest I no longer pay.
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Well, in any particular year, home maintenance can be minimal, but eventually things like new roof, new HVAC, new flooring, new appliances, tree removal, and things come along. I have many of these in my relatively short term budget. And the insurance and property taxes are every year for me. I won't even mention healthcare, which seems to be at the top of many people's lists.
 
There's talk about a K-shaped economy with spending in certain sectors still being high, which will drive prices up.

For instance, some airlines believe they can raise fares, especially business and first class fares.

Despite the inflation, many people will feel the wealth effect from the stock market, which would explain high fares.

OTOH, luxury brand sales are flat or down for the past couple of years. Demand from China is tepid as well as certain other regions.

But are people who used to go to steakhouses cutting back, despite record beef prices?
 
pb4uski said:
4.3% is close to full employment, so no particular reason to make a change there. 3.8% inflation, slightly elevated but not hot by any means except by comparison to an arguably unreasonable Fed 2% target... suggests standing pat or perhaps preemptively increasing rates to reverse the upward trend. 2.3% projected real GDP.... good enough methinks.

I don't see any reason to do much of anything.

Lower rates will help the government deficit slightly but at the risk of aggrevating inflation which is hard to control once it starts accelerating.

Stand pat.
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What bothers Fed folks is that last time inflation stats reached this level, they continued up embarrassingly to 9% and required radical policy rate increases.
Regards, Dick
 
Fermion said:
I hear the term today I think it was NEET. Not Employed, Educating, or Training. I am not sure if the employment numbers count those.
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I think that describes me, er maybe NEETER, NEET Early Retired.

I have high confidence this inflation spike won't be any less transient than the last one. How long until the new thread on I-bonds starts up?
 
SnowballCamper said:
I think that describes me, er maybe NEETER, NEET Early Retired.

I have high confidence this inflation spike won't be any less transient than the last one. How long until the new thread on I-bonds starts up?
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Sure....but for most folks here, the severe limits on purchase amounts make the benefits insignificant.
Regards, Dick
 
dickoncapecod said:
What bothers Fed folks is that last time inflation stats reached this level, they continued up embarrassingly to 9% and required radical policy rate increases.
Regards, Dick
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2021/22 was very different. That was stimulus and supply chain issues.

Inflation may continue creeping up, but I'd be amazed if anything resembling that period recurs.
 
mrfeh said:
2021/22 was very different. That was stimulus and supply chain issues.

Inflation may continue creeping up, but I'd be amazed if anything resembling that period recurs.
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Yeah, me too. But no matter where this inflation peaks, Fed knows it will be made the whipping boy, and they're sick of it. Further, by its nature, this bout of inflation will be unresponsive to monetary policy --- but that won't stop our elected self-servants from criticizing them.
Regards, Dick
 
Yes....it's worth remembering how rate hikes (theoretically and actually) help control inflation:
1. The ONLY enemy of inflation is higher prices ---- which ultimately reduce demand.
2. Interest rate increases HASTEN the rise in prices for everything, hastening demand destruction.
3. Supply shock-driven inflation? Monetary policy is helpless.
4. Sadly, Fed may be forced to increase policy rates to "maintain credibility" --- doing something that won't address the current problem simply to stop the rabble throwing rotten eggs and tomatoes.
Regards, Dick
 
Mortgage rates are heading higher, hit 6.5% for 30 year.
 
dickoncapecod said:
Yes....it's worth remembering how rate hikes (theoretically and actually) help control inflation:

2. Interest rate increases HASTEN the rise in prices for everything, hastening demand destruction.
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How do you figure? Interest rates tighten the money supply, meaning people aren't borrowing as much, meaning they aren't spending as much, meaning demand goes down. If demand goes down and if supply stays the same that is a recipe for lower prices.

Conversely, if interest rates are cut, money is more plentiful, spending goes up and with it demand goes up, meaning so do prices.
 
You have to understand lower interest rates drive demand up thus raising prices and causing inflation.

Higher interest rates raise prices by increase the cost of producing and delivering goods and service.

Does this make sense?

The simple matter is if I spend an extra $10 a week on gasoline that is $10 a week I don’t don’t have for the movie theater, the local pub, a new paddle for pickle-ball or whatever. At some point I have to NOT buy something, which reduces the demand for that good or service.
 
Qs Laptop said:
How do you figure? Interest rates tighten the money supply, meaning people aren't borrowing as much, meaning they aren't spending as much, meaning demand goes down. If demand goes down and if supply stays the same that is a recipe for lower prices.

Conversely, if interest rates are cut, money is more plentiful, spending goes up and with it demand goes up, meaning so do prices.
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Thats the theory, and in this case it’s a pretty good one.
Chuckanut said:
Higher interest rates raise prices by increase the cost of producing and delivering goods and service.
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Higher interest rates make money more expensive, so people borrow less. This leads to less money available for consumption, so demand contracts, which leads to recession and or deflation.
 
MichaelB said:
Thats the theory, and in this case it’s a pretty good one.

Higher interest rates make money more expensive, so people borrow less. This leads to less money available for consumption, so demand contracts, which leads to recession and or deflation.
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I agree. However others think differently.
 
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