Latest Inflation Numbers and Discussion

[USGrant1962]

...

There’s a fair chance inflation sticks where it is and we don’t see the rate cuts markets appear to expect. Just thinking out loud here ..

Yea, and a lot of the most recent decline in the inflation rate is tied to gasoline dropping [-]~25%[/-]~20% in the last 3 months (and the ripple effects of fuel costs on other prices). That can turn on a dime as Chuckanut hinted above.

EDIT - I misread some data, but the point stands.

 

[Bigdawg]

Your interpretation makes a lot of sense to me. That's what I've been expecting intuitively, without that data.

Count me in. It seems lots of people want either a hike or a cut. I say we leave rates where there are for a few months and see what happens.

 

[Ian S]

A significant component of the recent inflation has been corporate profiteering. There's data to support that here: https://www.epi.org/blog/corporate-...to-inflation-how-should-policymakers-respond/
There has even been recently successful court action for past price gouging in the egg industry: https://apnews.com/article/egg-prod...t-conspiracy-be6919b3fb42bf2d9d3884d5e133e91d
So, I'd say a good chunk of recent inflation has been due to corporate greed simply because they figured they could get away with it. Maybe they will for the most part because that recent verdict has taken over a decade to come to fruition. And who believes that egg producers would be the sole bad actors in this regard?

 

[Koolau]

A significant component of the recent inflation has been corporate profiteering. There's data to support that here: https://www.epi.org/blog/corporate-...to-inflation-how-should-policymakers-respond/
There has even been recently successful court action for past price gouging in the egg industry: https://apnews.com/article/egg-prod...t-conspiracy-be6919b3fb42bf2d9d3884d5e133e91d
So, I'd say a good chunk of recent inflation has been due to corporate greed simply because they figured they could get away with it. Maybe they will for the most part because that recent verdict has taken over a decade to come to fruition. And who believes that egg producers would be the sole bad actors in this regard?

I suppose that depends on the product that is being "gouged." Most (not all) products have substitutes or are thing people can live without. Hard to gouge those too much. People change their buying habits. I do and I don't have to.

Also, one man's profiteering is another man's "catch up" to production costs.

Not defending anyone raising prices, but I'm saying it's not always black and white. As always, YMMV.

 

[USGrant1962]

A significant component of the recent inflation has been corporate profiteering. There's data to support that here: https://www.epi.org/blog/corporate-...to-inflation-how-should-policymakers-respond/
There has even been recently successful court action for past price gouging in the egg industry: https://apnews.com/article/egg-prod...t-conspiracy-be6919b3fb42bf2d9d3884d5e133e91d
So, I'd say a good chunk of recent inflation has been due to corporate greed simply because they figured they could get away with it. Maybe they will for the most part because that recent verdict has taken over a decade to come to fruition. And who believes that egg producers would be the sole bad actors in this regard?

Did you read your egg story? The price gouging was in 2004-2008 when inflation was around 3%. Doesn't really support your thesis.

 

[milford]

Did you read your egg story? The price gouging was in 2004-2008 when inflation was around 3%. Doesn't really support your thesis.

Speaking of inflated egg prices its been steadily going back up again... supposedly the avian flu is going around that has been hindering supply.

 

[pb4uski]

Count me in. It seems lots of people want either a hike or a cut. I say we leave rates where there are for a few months and see what happens.

+1 As long as economic indicators don't suggest a slowdown of some sort and inflation is greater then the 2% target, why cut rates? I say keep rates as is until it is clear that inflation is beat unless there is evidence that the economy softens. Current rates for bonds are historically reasonable, as are 7% mortgage rates.

While really low interest rates might be welcome on Wall Street, to reignite the war on savers is not welcome on Main Street.

 

[Ian S]

Did you read your egg story? The price gouging was in 2004-2008 when inflation was around 3%. Doesn't really support your thesis.

Of course I read it. That's why I stated it was in the past and took over a decade for the legal system to do anything about it. My thesis is that there are corporate bad actors that will price gouge if they think they can get away with it. We've seen that with generic meds for instance although some of that was so egregious that the perpetrators got their hands slapped. With Covid, there were enough disruptions causing significant inflation that I believe cover was provided for corporations to pile on and enhance their profits thereby exacerbating the existing inflation. I believe the data shows this.

 

[CaptTom]

This may surprise those who know my posting history here, but I don't really blame corporations for being greedy. They will almost always charge exactly as much as the market will bear. No less. It's what they do. I don't believe that any of them were charging any less than they could get away with, before the latest round of supply chain issues and inflation.

What changed is that they believed (correctly, apparently) that they could get away with raising prices once people got used to everything going up. There might also be a bit of "catch up" from the times they were afraid that raising prices would hurt sales. I think they were right about that, too.

In the end I think we have only ourselves to blame. If we won't comparison shop, if we gladly buy higher-priced products thinking they're somehow "better," if we insist on going for the fashionable name brands to impress our friends, then we don't deserve lower prices.

The moment these corporations see sales slip because of higher prices, the prices will come right down. But I'm not holding my breath.

 

[Koolau]

This may surprise those who know my posting history here, but I don't really blame corporations for being greedy. They will almost always charge exactly as much as the market will bear. No less. It's what they do. I don't believe that any of them were charging any less than they could get away with, before the latest round of supply chain issues and inflation.

What changed is that they believed (correctly, apparently) that they could get away with raising prices once people got used to everything going up. There might also be a bit of "catch up" from the times they were afraid that raising prices would hurt sales. I think they were right about that, too.

In the end I think we have only ourselves to blame. If we won't comparison shop, if we gladly buy higher-priced products thinking they're somehow "better," if we insist on going for the fashionable name brands to impress our friends, then we don't deserve lower prices.

The moment these corporations see sales slip because of higher prices, the prices will come right down. But I'm not holding my breath.

Yeah, I hate inflation as much as the next person (maybe more?) BUT, as you point out, companies only raise prices because we allow it (IOW, because they can.) If we stopped buying products due to their higher prices, the prices would eventually come down. It's just a simple corollary of the well known and (virtually) universally accepted law of supply and demand. IOW "gouging" (as descriptive as it sounds) is just supply and demand going to the dark side.

Someone might say "Yeah, but some things, people can't live without." If that's true, then there's virtually no limit to the price, yet, there IS a limit to every price. If gummints don't step in and either 1) set prices at the point of a weapon or 2) pay most of the price for us, prices would NOT go up as much on these "priceless" items - because people would not pay them. YMMV

 

[karen1972]

Yeah, I hate inflation as much as the next person (maybe more?) BUT, as you point out, companies only raise prices because we allow it (IOW, because they can.) If we stopped buying products due to their higher prices, the prices would eventually come down. It's just a simple corollary of the well known and (virtually) universally accepted law of supply and demand. IOW "gouging" (as descriptive as it sounds) is just supply and demand going to the dark side.

Someone might say "Yeah, but some things, people can't live without." If that's true, then there's virtually no limit to the price, yet, there IS a limit to every price. If gummints don't step in and either 1) set prices at the point of a weapon or 2) pay most of the price for us, prices would NOT go up as much on these "priceless" items - because people would not pay them. YMMV

I think companies themselves have been shocked at the inelasticity of some of their products.. like soda for one.. brand loyalty+ people addicted = $$$$$. I honestly thought it was a misprint when I saw 12 pks of soda 3 for $18 on SUPER sale.. i dont drink so had no clue. But it made sense.. my diet coke friends would likely not be swayed by price so then I googled and saw $10 for a 12 pk at another local store it made sense to me why so many people are hurt by insane inflation and others are not.. Some things really have become very inelastic and big corps finally figured out how much. I'm still in the but I picked up a 2 LTR for 99 cent world usually at Christmas to go in drinks.

 

[GenXguy]

I think companies themselves have been shocked at the inelasticity of some of their products.. like soda for one.. brand loyalty+ people addicted = $$$$$. I honestly thought it was a misprint when I saw 12 pks of soda 3 for $18 on SUPER sale.. i dont drink so had no clue. But it made sense.. my diet coke friends would likely not be swayed by price so then I googled and saw $10 for a 12 pk at another local store it made sense to me why so many people are hurt by insane inflation and others are not.. Some things really have become very inelastic and big corps finally figured out how much. I'm still in the but I picked up a 2 LTR for 99 cent world usually at Christmas to go in drinks.

Yeah, it's crazy. I've really cut back on my diet caffeine free pop consumption with these outrageous prices after recent years of soaring inflation. Those bottles of Gatorade are even more ridiculously expensive, plus smaller bottles! So.... trying to drink more water, and not bottled!

 

[cyber888]

I buy my potato chips at Costco. The giant bag of Kettle chips is $5.99 as of yesterday and is equivalent to 10 small bags of 99 cents. So, technically, it's cheaper than the .99 cents bag. It takes me about 3-4 weeks to finish it.

Snack foods stand out among the highest price increases during this past round of inflation. The formerly 99-cent bag of store-brand chips is now regularly on sale at closer to $3. The brand names are stupid expensive; way more than I'd be willing to pay.

I'm curious why these $1 products are now going for $1.79, $1.89 and up to $3. We're talking 79%, 89% and up to 300% increases here. This would be at least 10 times more, and for some things, 40 times more than the "official" inflation rate.

My best guess is, during the supply chain issues everything spiked. Staples had to come back down eventually, but snack food manufacturers found that the high prices did nothing to reduce demand. In short, if we're stupid enough to pay 3x as much, they'd be foolish not to sell it to us at that price. Yeah, no. I can do without chips, thanks.

 

[GenXguy]

I buy my potato chips at Costco. The giant bag of Kettle chips is $5.99 as of yesterday and is equivalent to 10 small bags of 99 cents. So, technically, it's cheaper than the .99 cents bag. It takes me about 3-4 weeks to finish it.

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.

 

[jim584672]

Cheer up GenXGuy, gasoline $2.99 today by me.

 

[Montecfo]

+1 As long as economic indicators don't suggest a slowdown of some sort and inflation is greater then the 2% target, why cut rates? I say keep rates as is until it is clear that inflation is beat unless there is evidence that the economy softens. Current rates for bonds are historically reasonable, as are 7% mortgage rates.

While really low interest rates might be welcome on Wall Street, to reignite the war on savers is not welcome on Main Street.

You have described Fed's stated policy accurately. Based on current conditions they have not cut. But they will and they see more data that we do. The economy is slowing and their policy is restrictive. Matter of time before it moves toward neutral. My guess is neutral is 2% Fed funds. Lots of room to cut.

As for this war on savers, The Fed has a whole economy to worry about. I guess all the rate hikes are a "war on borrowers". Or a "war on employment"? Or more likely just designed to keep the economy afloat. Fed was slow to hike, that's true. But after decade trying to get UP to 2% and failing, that is not hard to understand. They probably remember that still and don't wish to kill the economy.

As an aside on equities, the Magnificent 7 are at high PEs. The other 493 stocks in the S&P? Not so much.

At the start of a rate decline cycle has been an excellent time to have exposure to equities.

Just sayin'.

 

[pb4uski]

^^^ I would hardly call a 7% 30-year mortgage rate a war on borrowers. The average 30-year mortgage interest rate from 1996-2006 was 6.0-6.5%.

The average from 2009-2021 was unusually low at 4.0% so us savers are due.

 

[MichaelB]

The “war on savers”, or an extended period of low to negative interest rates, was not Fed policy. It was the result of deep economic imbalances in the US and around the world.

At least over the next year or couple of years the economy does not seem headed in a similar direction. Much greater public borrowing will help keep rates higher, and record US petroleum production and exports are helping (a little) offset the trade deficit. The trade deficit however, is a potential source of risk.

 

[Koolau]

Cheer up GenXGuy, gasoline $2.99 today by me.

Nice! My gas is STILL $4.20/gallon!

 

[aja8888]

Nice! My gas is STILL $4.20/gallon!

$2.31 here today.

 

[Montecfo]

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.

Those things are bad for you. Inflation doing you a favor. Don't buy and it is 100 Oct savings!

 

[Montecfo]

^^^ I would hardly call a 7% 30-year mortgage rate a war on borrowers. The average 30-year mortgage interest rate from 1996-2006 was 6.0-6.5%.

The average from 2009-2021 was unusually low at 4.0% so us savers are due.

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.

 

[Bigdawg]

Nice! My gas is STILL $4.20/gallon!

Umm, u r in HI. A penny costs 7 cents there.

 

[Gumby]

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

 

[Fermion]

Nice! My gas is STILL $4.20/gallon!

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