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US Inflation Tops Forecasts, Cementing Odds of Big Fed Hike (bloomberg.com) 194

Posted by msmash from the closer-look dept.
US consumer prices were resurgent last month, dashing hopes of a nascent slowdown and likely assuring another historically large interest-rate hike from the Federal Reserve. From a report: The consumer price index increased 0.1% from July, after no change in the prior month, Labor Department data showed Tuesday. From a year earlier, prices climbed 8.3%, a slight deceleration, largely due to recent declines in gasoline prices. So-called core CPI, which strips out the more volatile food and energy components, advanced 0.6% from July and 6.3% from a year ago, the first acceleration in six months on an annual basis. All measures came in above forecasts. Shelter, food and medical care were among the largest contributors to price growth.

The acceleration in inflation points to a stubbornly high cost of living for Americans, despite some relief at the gas pump. Price pressures are still historically elevated and widespread, pointing to a long road ahead toward the Fed's inflation target. Chair Jerome Powell said last week that the central bank will act "forthrightly" to achieve price stability, and some policy makers voiced support for another 75 basis-point rate hike. Officials have said their decision next week will be based on the "totality" of the economic data they have on hand, which also illustrates a strong labor market and weakening consumer spending. Treasury yields surged, the S&P 500 index opened lower and the dollar rose. Traders boosted bets that the Fed will raise interest rates by three-quarters of a percentage point, now seeing such an outcome as locked in.
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US Inflation Tops Forecasts, Cementing Odds of Big Fed Hike More

US Inflation Tops Forecasts, Cementing Odds of Big Fed Hike

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  • Higher inflation means higher interest rates (Score:3, Interesting)

    by Ed Tice ( 3732157 ) on Tuesday September 13, 2022 @11:23AM (#62877551)
    Which means more money for those of us who saved our stimulus checks as we will not get good interest rates for our savings. Of course for those who spent their stimulus checks even though they have high-interest credit card balances, well, I guess they are going to wish they hadn't bough that cheaply-made expensively-transported Chinese junk.

    Cue the trolls who are going to say that stimulus checks caused inflation. Of course that is farcical but it will still get posted by partisans. Now the *spending* of those checks on non-necessities certainly contributed to inflation. But that's not a function of sending the checks, that's a function of the recipients not managing the money well.

    The correlation coefficient between those who spent their stimulus poorly and those who are now loudly complaining about inflation is likely to be very close to 1.0

    • With the way people talk you'd think everyone deposited those stimulus checks and then retired.

      • Sounds nice to me. I'm over a decade from retirement age. But should there be another global pandemic, I'm adopting your plan!

    • In a thread on a different TFA someone claimed that it is on the San Francisco's businesses to hire additional security and to clean up their block of human waste if they want to keep their customers.

      I get a sense that the left will deny any chance of wrongdoing by the Democrats out of fear that if there is a single crack in their defense the country will end up with President Trump v2, and there is no worse nightmare they could live through. Although I am not sure what metrics they use to come to that conc

    • There are no good new for anyone. The report says "for 17th straight month, Americans' wages lost ground relative to the cost of living."
      2-3% interest rate on saving is nothing compared to 8-9% loss of value due to inflation. Also, bonds are down 15% since August last year. Stock market as well. Americans are losing money.

    • the trolls who are going to say that stimulus checks caused inflation. Of course that is farcical... Now the *spending* of those checks on non-necessities certainly contributed to inflation....

      What kind of hair splitting is that? And yourpost reads like you are actually serious?

      Putting more money into circulation causes inflation. Macroeconomics 101. Did you perhaps expect people to frame their stimulus checks and put them on the wall? Or did you forget the sarcasm tag?

      • Re: (Score:2)

        by Pascoea ( 968200 )

        Did you perhaps expect people to frame their stimulus checks and put them on the wall?

        They are apparently convinced that 99% of the checks were spent buying iPhones, Play Stations, and designer shoes. The other 1% put them into 10% yield savings accounts. IE, they have their head shoved up their ass.

      • I expected them to either buy necessities like food, pay off debt, or deposit the money into savings accounts or the like. And about 70% of people did just that.

        https://www.nber.org/digest/oc... [nber.org].

  • Expect much higher Unemployment too? (Score:3, Interesting)

    by cayenne8 ( 626475 ) on Tuesday September 13, 2022 @11:23AM (#62877555) Homepage Journal
    I saw a talking head on one of the business channels last night, saying that some experts are saying that the high interest will be combined likely with the "need" for 6.5% unemployment for about 2x years in order to get inflation back down to 2% annually.

    That may cause some real pain.

    I'm wondering, tho...how those number play with todays reality of SO many people having dropped out of the workforce, no longer looking since covid....they aren't counted now an unemployed, so how do all these numbers really work out?

    • Re: (Score:3, Interesting)

      by burtosis ( 1124179 )

      no longer looking since covid

      Millions of workers no longer can work because of Covid [npr.org]. They have permanent disability and cannot work. It’s no coincidence it’s now a workers economy, when you cull a few % of the workers suddenly there’s a shortage. It’s sad that seems to be the only way workers can get some advantage these days.

      • Millions of workers no longer can work because of Covid [npr.org]. They have permanent disability and cannot work. Itâ(TM)s no coincidence itâ(TM)s now a workers economy, when you cull a few % of the workers suddenly thereâ(TM)s a shortage. Itâ(TM)s sad that seems to be the only way workers can get some advantage these days.

        Interesting article. And while I can guess there are a significant number of long covid folks in this situation, I have a hard time believing it is THAT high....I th

        • Re:Expect much higher Unemployment too? (Score:5, Interesting)

          by AmazingRuss ( 555076 ) on Tuesday September 13, 2022 @12:24PM (#62877811)
          Yeah, fuck them for seeking a life that isn't constant grinding misery. Luckily there are folks like you to take the shit jobs.

        • And while I can guess there are a significant number of long covid folks in this situation, I have a hard time believing it is THAT high....I think it said 2.4% of the US worker population?

          Consider that the life expectancy in the US decline by 3 years since Covid (most of which can be attributed to Covid). That is about a 4% decline. I don’t think 2.4% sounds at all unreasonable. Remember, too, that most people survive Covid - but plenty of those survivors didn’t emerge unscathed. I personally know of several people who were knocked out of the workforce (though not permanently) due to the illness.

          • I personally know of several people who were knocked out of the workforce (though not permanently) due to the illness.

            Really? I don't know of a single one knocked out by long covid.

            Out of all of them, I may have some long covid symptoms...from asymptomatic infection I guess as that I don't recall ever feeling bad. Hell, the vaccinations cause more pain than anything else really in past couple years, for immediate cause/effect at least.

            For the matter, I don't know that many people out of my many friends a

      • Re: (Score:2)

        by c ( 8461 )

        The other factor is there's been a huge wave of retirements over the last couple of years.

    • I doubt the government would intentionally pay the price of 6.5% unemployment for 2 years to get inflation back down to 2%, and question whether I would want them to. 8% inflation on food hurts its affordability, sure, but compared to losing your job?

      • I doubt the government would intentionally pay the price of 6.5% unemployment for 2 years to get inflation back down to 2%, and question whether I would want them to. 8% inflation on food hurts its affordability, sure, but compared to losing your job?

        I wish I could remember the exact years they were refering to, on the tv episode, but I think they said pretty much this happened in the early 80's maybe? Maybe late 70's early 80's...I can't remember, but apparently last time we had rampant inflation, it was

        • Yes but attacking the fundamentals like that changed American politics because it cost Carter his job. No President would do that now, not on purpose.

    • > 6.5% unemployment

      No chance it'll be that low. They're slow-rolling it.

      When all of your available money is spent on food, energy, housing, and taxes, that triggers a economic Cascade Failure.

      No ballet lessons.
      No new cell phones.
      No optional car repairs.
      No retirement investments.
      No amusement parks.
      No restaurants.
      No movies.

      All the things that are nice about life come from disposable income and that's already hovering around zero. 60% of Americans can't handle an emergency $400 expense already.

      So everybo

    • Re: (Score:2)

      by Tablizer ( 95088 )

      > likely with the "need" for 6.5% unemployment for about 2x years in order to get inflation back down to 2% annually.

      Inflation is typically be caused by one more more of these factors:

      1. More demand than factories can supply
      2. Not enough labor to meet service & manufacturing demand
      3. Price of raw materials goes up.
      4. Too much money floating around in the economy

      Interest rates have a strong effect on 4, a partial effect on 1 and 2, and a very minor effect on 3.

      The labor pool shrank in part due to more

  • I think given that housing is the biggest expense these days, changing the prime rate can increase inflation, not decrease it. When it is harder to get loans, there is less construction/production. Hmm let's see .. less production/construction but demand is unchanged ..people still want houses .. what happens? Fewer apartments being built means fewer available units. Less available units mean the owners can jack up prices.

    • We're seeing 15 to 20 percent increases in rent in my area on renewed leases. I don't see people's wages keeping up with that.

      • That is my point. The problem will only get worse if the prime rate is increased. Less construction = fewer units available = higher prices. Destroying production is never the answer.

        • Yeah, I don't think the Fed has the right levers to impact current inflation; it is pretty fundamental to the situation created over the last 2.5 years. A short-term bump in mortgage rates is likely non-destructive, but if they think another 75 bps increase after the coming one is going to work I think they are sorely mistaken.

          That said, I'm not sure what should be done. Current inflation levels are a huge problem, and sustaining them for another year is not an option.

        • It is if your only bent is to protect the investing class and screw over the working class. The investing class is hedging their bets right now and tightening up their investments. Corporations are sensitive to this, and are also sensitive to the fact that borrowed money just got more expensive as the prime rate is going up yet again. Companies that are reliant on new rounds of financing are stuck between a rock and a hard place if they can't convince investors to give them more money. So now these companie

    • Actually no. Housing prices skyrocketed because of low interest rates. As you surmise, people buy a payment. When interest rates rise, the principle has to go down. Housing prices are sticky though as sellers hate to sell a house for 1M when their neighbor sold theirs for 1.5M 6 months ago. Eventually though they will drop their price to around 750 (about 1/2 the neighbor's price) because the payment for a 750K house is now about the same as a 1.5M house 6 months ago. That means house prices went down, or d
  • This is what happens when multiple branches of government are working against each other. White House is enacting measures to increase spending and Fed is trying to suppress it. Recession is here and stagflation is next. Dems will try to hide it until the midterms and then the hell will break loose.

  • Get used to inflation, or just high interest rates (Score:5, Interesting)

    by RobinH ( 124750 ) on Tuesday September 13, 2022 @12:06PM (#62877725) Homepage

    The world is changing in a way we don't really have much control over, and the consequence of those changes is that we're going to produce less stuff, and that less stuff spread over the same number of (or slightly more) people means we have to get used to having less stuff. While people still believe we can all have the same amount of stuff we had in 2018 and 2019, they'll keep spending even when they don't have the money, and they'll drive inflation. All countries know that inflation is really bad, so governments will go with the less bad option of higher interest rates to counter it, and they'll keep raising it until people slow down their consumption.

    Why do we have less stuff? Since millennials (the boomers' kids) entered the workforce, we were in a situation where we had a lot of people all in the workforce at once. So many people, in fact, that millennials were so desperate for work that they drove up the gig economy by driving for Uber or delivering Amazon packages for very cheap rates, and we all got used to those very cheap services. At the same time, China had just graduated a huge number of people into their workforce and were busy finding stuff for them to do, and it turns out that we in the west were happy to buy all those cheap products and have them delivered to our door by cheap delivery drivers. Well, now things are different. The boomers are in the middle of mass retirement, and the generation that's started graduating now (Gen Z) is much, much smaller. The millennials are moving up the ladder and taking better, higher paid jobs, and if you hadn't noticed we have labour "shortages" everywhere. It's not so much a shortage as the fact that we kind of had a labour surplus before. Simultaneously, China's manufacturing is being hit by a COVID pandemic they still can't manage, higher cost shipping, and they've run out of young graduates to fill their factories. Your American dollar or Euro doesn't buy as much Chinese goods as it used to.

    Finally, the balance of global trade is shifting. After COVID, and Russian aggression, and Chinese expansionism, western countries aren't comfortable with all this interdependence on foreign trade, and with smaller generations graduating all over the world, there's little incentive to want to expand into those markets. All of that is driving a massive re-shoring movement, particularly back to North America. But as anyone who's taken ECON 101 knows, when countries stop specializing, reduce trade, and have to produce a more broad range of products for their own markets, then worker efficiency and productivity goes down. So you gain independence from foreign markets, but your total production goes down, and some of that productivity is being redirected to building out your own production capacity. Case in point: the CHIPS act which throws a bunch of money at high tech manufacturers to bring production capacity back to the US. All those people building chip fabs are people that aren't doing other services in the economy. There's no free lunch.

    When you add all of that up, having less stuff is the new norm for the world, at least over the next 10, 15, or 20 years. The only possible foil is that we're also seeing an explosion in automation technology, so it's possible we can make up for some of the smaller labour pool by increasing worker productivity with better automation. We'll see how that goes. But this situation with inflation and interest rates is certainly not a short term phenomenon.

    Oh, and the other thing that decreased interdependency on trade gives us? More wars. Countries don't go to war with other countries who are big suppliers or consumers of their stuff. That (by historical standards) peaceful time we've been enjoying is coming to an end.

    • 80% of what we own has no impact on our survival. It's otherwise useless crap we entertain ourselves with.

    • The main reason we'll have less stuff is over decades we were able to sucker people in other countries to take US dollars for goods and services which we enjoyed back here in the states, but that time is finally coming to an end. When people in other countries don't need the dollar to buy things like oil, they will want no part of the USD which has been inflated by leaps and bounds, and we'll have to pay a currently unthinkable amount of USD for pretty much anything that comes from overseas.

      Lesson is, buy

  • The effect of high gas prices takes almost half a year to work through the supply chain into retail prices. Gas just started to lower, so expect retail prices to lower in the same time from now as it took for higher gas prices to finally make it to the products you buy now.

    Food tracks a bit faster because limited shelf life, but everything else has a longer supply chain. There is probably a month before costs level off and another or two before any costs go down.

  • And it's worse than that... (Score:4, Informative)

    by bradley13 ( 1118935 ) on Tuesday September 13, 2022 @12:22PM (#62877797) Homepage

    The way the US government measures inflation has changed over time. By sheerest coincidence, each changes has lef to lowermeasured inflation. Products that literally everyone needs - like food - are now seriously underrepresented. The inflation actually experienced by the average consumer 8s much higher.

    You can see the older measures on ShadowStats. It may be an ugly website, but the data is revealing.

  • Frustrating population puzzle (Score:4, Insightful)

    by Tablizer ( 95088 ) on Tuesday September 13, 2022 @02:30PM (#62878351) Journal

    > Shelter, food and medical care were among the largest contributors to price growth.

    It baffles me why we have to try to shove everybody into the same ten cities. There are plenty of shrinking towns in the northern mid-west that have room. There's a huge mis-allocation of population going on. Do we really have to continue forcing people into the inflamed bottlenecks? I get it, snow can suck, but beggars can't be choosers, dammit!

    • Re:Frustrating population puzzle (Score:4, Insightful)

      by Fly Swatter ( 30498 ) on Tuesday September 13, 2022 @04:29PM (#62878809) Homepage
      People go where the jobs are. You can't fix this by having a larger company build something in a smaller town, you have to get several companies to build in that same town so that there is not the risk of one company shutting down and taking their ball home and all the jobs with them. The economy won't follow a single large corporation to a smaller town, too much risk and not enough safety net.

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