This week was a reminder that inflation isn’t going away anytime soon.
Gas prices displayed at gas stations in Chicago, IL on March 12, 2024.
Scott Olson | Getty Images
From consumer and wholesale prices to long-term public expectations, this week’s coverage has repeatedly reminded us that: inflation It won’t go away anytime soon.
Overall data showed pressures rising faster than expected, raising concerns that inflation could persist longer than policymakers expected.
The bad news started on Monday. New York Federal Reserve Survey It showed that long-term consumer expectations accelerated in February.The following news continued on Tuesday: Consumer prices rose 3.2% It started a year ago and culminated Thursday with a release showing its pipeline. Pressure at the wholesale level is also heating up.
These reports will give the Fed plenty to think about when it convenes on Tuesday for a two-day policy meeting to determine current interest rate levels and provide an updated outlook on the long-term outlook. .
“As these numbers continue to come in, it becomes increasingly difficult to justify a preemptive rate cut,” said Stephen Blitz, chief U.S. economist at TS Lombard. Taken together, these numbers show that “massive disinflation appears to be stalling and reversing.”
The latest shock to inflation came on Thursday when the Labor Department reported: producer price index, a forward-looking indicator of pipeline inflation at the wholesale level, rose 0.6% in February. This was double the Dow Jones forecast and pushed the 12-month level up by 1.6%, the biggest gain since September 2023.
The department’s Bureau of Labor Statistics released the data earlier this week. consumer price indexThe index, which is widely used by the market to measure the cost of goods and services, rose 0.4% month-on-month and 3.2% year-on-year, the latter figure slightly higher than expected.
Higher energy prices contributed significantly to both increases in inflation, but there was also evidence of broader pressures from items such as airfares, used cars and beef.
Indeed, as the focus shifted to services inflation, the PPI measure saw commodity prices rise by 1.2%, the biggest increase since August 2023.
“PPI data continues to show signs that price disinflation is nearing an end,” Citigroup economist Veronica Clark wrote after the report’s release.
Overall, persistently high prices appear to be hurting both consumer expectations and behavior. Although significantly lower than its peak in mid-2022, inflation remains resilient despite the Fed’s moves to raise interest rates a total of 5.25 percentage points a total of 11 times and reduce bond holdings by nearly $1.4 trillion. has been proven.
A New York Fed survey showed that expectations for three- and five-year inflation rose to 2.7% and 2.9%, respectively. While such surveys are often particularly sensitive to gas prices, this survey shows that energy expectations are relatively constant and that the Fed is unlikely to hit its 2% mandate anytime soon. This reflects consumers’ suspicions that this may not be the case.
At the policy level, that could mean the Fed May keep interest rates higher For a longer period of time than the market expected. Traders in the federal funds futures market had priced in as many as seven rate cuts, totaling 1.75 percentage points, earlier this year. Since then, the cut has been reduced to three.
In addition to surprisingly strong inflation statistics, consumers are showing signs of shedding large purchases from the past few years. retail sales The seasonally adjusted figure, which does not take into account inflation, showed a rise of 0.6%, which was lower than expected and after a downward revision of 1.1% in January.
Sales increased by 1.5% over the past year. This was 1.7 percentage points below headline inflation and 2.3 percentage points below core inflation, which excludes food and energy.
Investors will find out how policymakers feel when the Federal Open Market Committee meets next week to set interest rates. The FOMC is scheduled to announce both interest rate decisions (which are virtually unlikely to change in either direction) and revised outlooks for long-term interest rates, gross domestic product, inflation, and unemployment.
TS Lombard economist Blitz said the Fed is right to take a patient approach after officials have said in recent weeks that: they need more evidence Data from before the move to rate cuts.
“The Fed has time to watch and wait,” he said, adding that “its next action is likely to be a rate hike.” [are] greater than zero. ”
Summarize this content to 100 words Gas prices displayed at gas stations in Chicago, IL on March 12, 2024. Scott Olson | Getty ImagesFrom consumer and wholesale prices to long-term public expectations, this week’s coverage has repeatedly reminded us that: inflation It won’t go away anytime soon.Overall data showed pressures rising faster than expected, raising concerns that inflation could persist longer than policymakers expected.The bad news started on Monday. New York Federal Reserve Survey It showed that long-term consumer expectations accelerated in February.The following news continued on Tuesday: Consumer prices rose 3.2% It started a year ago and culminated Thursday with a release showing its pipeline. Pressure at the wholesale level is also heating up.These reports will give the Fed plenty to think about when it convenes on Tuesday for a two-day policy meeting to determine current interest rate levels and provide an updated outlook on the long-term outlook. .”As these numbers continue to come in, it becomes increasingly difficult to justify a preemptive rate cut,” said Stephen Blitz, chief U.S. economist at TS Lombard. Taken together, these numbers show that “massive disinflation appears to be stalling and reversing.”CNBC reports on inflationThe latest shock to inflation came on Thursday when the Labor Department reported: producer price index, a forward-looking indicator of pipeline inflation at the wholesale level, rose 0.6% in February. This was double the Dow Jones forecast and pushed the 12-month level up by 1.6%, the biggest gain since September 2023.The department’s Bureau of Labor Statistics released the data earlier this week. consumer price indexThe index, which is widely used by the market to measure the cost of goods and services, rose 0.4% month-on-month and 3.2% year-on-year, the latter figure slightly higher than expected.Higher energy prices contributed significantly to both increases in inflation, but there was also evidence of broader pressures from items such as airfares, used cars and beef.Indeed, as the focus shifted to services inflation, the PPI measure saw commodity prices rise by 1.2%, the biggest increase since August 2023.”PPI data continues to show signs that price disinflation is nearing an end,” Citigroup economist Veronica Clark wrote after the report’s release.Overall, persistently high prices appear to be hurting both consumer expectations and behavior. Although significantly lower than its peak in mid-2022, inflation remains resilient despite the Fed’s moves to raise interest rates a total of 5.25 percentage points a total of 11 times and reduce bond holdings by nearly $1.4 trillion. has been proven.A New York Fed survey showed that expectations for three- and five-year inflation rose to 2.7% and 2.9%, respectively. While such surveys are often particularly sensitive to gas prices, this survey shows that energy expectations are relatively constant and that the Fed is unlikely to hit its 2% mandate anytime soon. This reflects consumers’ suspicions that this may not be the case.At the policy level, that could mean the Fed May keep interest rates higher For a longer period of time than the market expected. Traders in the federal funds futures market had priced in as many as seven rate cuts, totaling 1.75 percentage points, earlier this year. Since then, the cut has been reduced to three.In addition to surprisingly strong inflation statistics, consumers are showing signs of shedding large purchases from the past few years. retail sales The seasonally adjusted figure, which does not take into account inflation, showed a rise of 0.6%, which was lower than expected and after a downward revision of 1.1% in January.Sales increased by 1.5% over the past year. This was 1.7 percentage points below headline inflation and 2.3 percentage points below core inflation, which excludes food and energy.Investors will find out how policymakers feel when the Federal Open Market Committee meets next week to set interest rates. The FOMC is scheduled to announce both interest rate decisions (which are virtually unlikely to change in either direction) and revised outlooks for long-term interest rates, gross domestic product, inflation, and unemployment.TS Lombard economist Blitz said the Fed is right to take a patient approach after officials have said in recent weeks that: they need more evidence Data from before the move to rate cuts.”The Fed has time to watch and wait,” he said, adding that “its next action is likely to be a rate hike.” [are] greater than zero. ”
https://www.cnbc.com/2024/03/14/this-week-provided-a-reminder-that-inflation-isnt-going-away-anytime-soon.html This week was a reminder that inflation isn’t going away anytime soon.