The Bureau of Labor Statistics said that consumer prices jumped 0.5 percent in January, its fastest pace in four months. The increase in consumer inflation was led by higher energy costs, which rose by 3.0 percent in January, with gasoline prices up 5.7 percent and fuel oil up 9.5 percent. This is largely consistent with data from the Energy Information Administration, which pegged the average price for regular conventional gasoline at $2.384 per gallon on December 25 but increasing to $2.516 a gallon on January 29. At the same time, food prices rose by 0.2 percent for the second straight month. Since January 2017, food and energy costs have increased 1.7 percent and 5.9 percent, respectively. Read More
The Bureau of Labor Statistics said that consumer prices edged up by 0.1 percent in October, slowing from more robust growth in both August and September. The increases in the prior two months were led by significant growth in energy costs, largely on negative impacts from recent hurricanes, which were up by 2.8 percent and 6.1 percent in those months, respectively. Energy prices began normalizing in October, off by 1.0 percent, with gasoline prices down 2.4 percent. At the same time, food prices were unchanged. Since October 2016, food and energy costs have increased 1.3 percent and 6.4 percent, respectively. Excluding food and energy, core consumer inflation increased by 0.2 percent in October, buoyed by higher costs for medical and transportation services, shelter expenses and used car and trucks.
Overall, the consumer price index (CPI) increased 2.0 percent year-over-year in October, down from 2.2 percent in September. There has been an acceleration in pricing pressures since June’s 1.6 percent year-over-year reading, but the current pace remains well below the 2.8 percent pace seen in February. In addition, core consumer prices, which exclude food and energy costs, have risen 1.8 percent over the past 12 months, inching up slightly from 1.7 percent in the prior release. Read More
The Federal Open Market Committee (FOMC) voted to raise short-term interest rates at the conclusion of its June 13–14 meeting for only the third time since the financial crisis. After hiking the federal funds rate in December and March, the Federal Reserve increased rates by another 25 basis points, with a new target range of 1 to 1.25 percent. In making this decision, participants noted recent strengthening in the overall macroeconomy, including better data for consumer spending, business investment and hiring. Beyond this latest action, it is widely anticipated that the FOMC will increase rates one more time in 2017, perhaps as soon as its September 19–20 meeting. Such a decision, of course, would depend on continued improvements in economic activity, especially as the Federal Reserve remains “data dependent.” At this meeting, there was one dissenter: Minneapolis Federal Reserve Bank President Neel Kashkari, who felt that incoming data did not warrant an increase just yet. Read More
The Bureau of Labor Statistics said that producer prices for final demand goods and services increased 0.5 percent in April, bouncing back strongly after declining by 0.1 percent in March. For manufacturers, producer prices for final demand goods rose by 0.7 percent, boosted by strong gains in both food and energy costs, up 0.9 percent and 0.8 percent, respectively. On a year-over-year basis, final demand food and energy costs have risen 1.7 percent and 14.2 percent, respectively. It was second consecutive year-over-year increase in food prices for producers after declining in every month since February 2015 prior to that. Excluding food and energy, producer prices for final demand goods were up 0.3 percent.
Overall, producer prices for final demand goods and services have increased 2.5 percent since April 2016, its fastest pace since February 2012. That represents a notable acceleration in inflationary pressures after being unchanged in August. Meanwhile, core producer prices – which exclude food, energy and trade services – grew 2.1 percent year-over-year in April, up slightly from 1.8 percent in March. This will lend further credibility to the Federal Reserve’s current normalization schedule, which is currently expected to raise short-term interest rates two more times in 2017, with the next increase coming in at its June meeting.
As expected, the Federal Open Market Committee (FOMC) voted to raise short-term interest rates by 25 basis points, upping them just three months after the last action. In doing so, the Federal Reserve noted better economic data and increased pricing pressures. Specifically, the statement cited a strengthening labor market, moderate growth in consumer spending and business investment that has “firmed somewhat.” While inflation is picking up, the FOMC predicts that prices “will stabilize around 2 percent over the medium term.” Nonetheless, it wants to stay ahead of such pressures while inflation is still at acceptable ranges. Hence, the Federal Reserve will continue its process toward normalized rates, and according to the latest economic projections, participants still see three rate hikes—or two more after this one—in 2017. Assuming those increases in the federal funds rate were also 25 basis points, the target range would be at 1.25 percent to 1.50 percent by year’s end (up from 0.75 percent to 1.00 percent after this action).
Of course, future Federal Reserve moves will hinge on incoming data, and more aggressive action might be necessary if the U.S. economy and/or inflation accelerate beyond current expectations. Along those lines, the economic forecasts did not change much from December. Participants see 2.1 percent growth on average in real GDP in 2017, with the unemployment rate falling to 4.5 percent. They also predict core inflation of 1.9 percent. Looking to 2018, FOMC members anticipate thee additional federal funds rate hikes, with real GDP growth of 2.1 percent once again. They forecast core inflation to be 2 percent.
Neel Kashkari, president of the Minneapolis Federal Reserve Bank, was the only dissenter. He preferred to keep short-term interest rates unchanged, at least for now.
The Federal Open Market Committee (FOMC) opted to raise short-term rates for the first time so far in 2016 at the conclusion of its December 13–14 meeting. The target of the federal funds rate was increased by 25 basis points, with the range now between 0.50 to 0.75 percent. This move was widely expected, with financial markets having already pricing in this move. Moving into 2017, FOMC participants appear to be more hawkish than they were three months ago, with economic projections appearing to forecast three rate hikes next year. That is up from a median prediction of two rate hikes at their September meeting. Beyond next year, Federal Reserve participants also see three increases in both 2018 and 2019.
To be fair, the Federal Reserve is playing catch-up a little here, with the bond market already sending yields significantly higher since the election. Indeed, yields on 10-year Treasury bonds have already risen more than 60 basis points since early November. Read More
Producer prices increased 0.4 percent in November, bouncing back from being unchanged in October at growing at its fastest monthly pace since June. Digging into the data, producer prices for final demand goods rose for the third straight month, up 0.2 percent in November. A large jump in food costs, up 0.6 percent, helped to explain much of this boost, with energy prices edging down 0.3 percent. Still, food costs have been on a downward trend over the longer-term, down 2.6 percent over the past 12 months. On the other hand, energy prices have were virtually flat year-over-year, up just 0.2 percent. Excluding food and energy, final demand goods prices for producers increased by 0.2 percent in November. Read More
Producer prices were unchanged in October, slowing after a rebound in the September data. The flat growth in the headline number stemmed from reduced producer prices for final demand services, down 0.3 percent. In contrast, producer prices for final demand goods increased 0.4 percent in October, extending the 0.7 percent gain seen in September. Higher inflation for goods came largely from a jump in energy costs, up 2.5 percent; whereas, food prices were off by 0.8 percent. Food costs have been on a downward trend over the longer-term, down 3.5 percent over the past 12 months. On the other hand, energy prices have edged up 0.2 percent year-over-year. Read More
Producer prices ticked higher in September, bouncing back from softness in the prior two months. The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.3 percent in September, the first increase reading in three months. For final demand goods, food and energy prices were both higher, up 0.5 percent and 2.5 percent, respectively, but each were coming back from notable declines in both July and August. The longer-term trend has been negative for both. Food costs have decreased 3.4 percent over the past 12 months, with energy prices off by 2.4 percent year-over-year. Read More