As the US economy fully resumed, rising living costs (also known as inflation) surged at its highest rate in more than a decade. How high will it be? And how long will it last?
It’s unlikely that you’ll be able to answer these questions for months or more, but MarketWatch continues to monitor them. Check out the new inflation tracker launched in the May report on consumer prices.
Tracker shows current inflation rates for the four price barometers closest to Wall Street’s main street
And in Washington.
The Federal Reserve Board claims that the surge in inflation is the result of an economic recovery as the coronavirus pandemic disappears. Senior Federal Reserve Board officials predict that price pressures will ease next year, leading to lower inflation.
MarketWatch Inflation Tracker helps investors stay up to date.
Each of the four gauges shows price increases over the last 12 months. It also compares the current increase with the 10-year average for each index.
A little about the four gauges.
The Consumer Price Index measures the amount of money Americans pay directly for a variety of goods and services, including gas, food, clothing, travel, and transportation. Increased social security and many other benefits are also related to the CPI.
Core CPI tends to remove food and energy prices and see the underlying inflation more accurately. why? Prices of food, especially gas, can fluctuate up and down from time to time, giving a distorted view of overall inflation.
The Fed does not ignore food and energy. Central banks are only discounting short-term moves.
Take gasoline. At the time of the spring 2020 pandemic, motor fuel costs fell 34% annually. Fast-forwarding in May, gasoline costs have skyrocketed at a pace of 56% in the last 12 months.
If gas and food prices rise sharply over time, the rise will eventually appear in the major consumer price index. But often this is not the case.
Another set of inflation barometers that MarketWatch is tracking is the PCE and Core PCE. Also known as the Personal Consumption Expenditure Index.
PCE is the Fed’s recommended inflation barometer. It puts more emphasis on medical costs and tracks both direct and indirect costs incurred by consumers.
It also takes into account changes in what Americans buy. Let’s say the price of beef soars and shoppers switch to cheaper proteins such as chicken and pork. These alternatives tend to result in lower inflation.
Over time, the PCE inflation gauge will be lower than the consumer price index. But even today’s PCE is unusually high.
The 12-month interest rate rose in April to a 13-year high of 3.6% and is expected to rise further in May. The next PCE report will be published two weeks later.
Inflation is skyrocketing. How high will it be? Check out the new MarketWatch trackers.
Source link Inflation is skyrocketing. How high will it be? Check out the new MarketWatch trackers.