Producer Price Index Rises More Than Forecast

We have yet to hear from your wife on these recent PPO numbers as she is clearly the expert on such matters.

 

I can’t wait.

 

Cooled slightly more than expected.

 

Finally below 3%-first time since 2021.

And those on these boards rooting against America solely for partisan political reasons will be disappointed again.

 

https://www.cnn.com/2024/08/14/economy/us-cpi-consumer-price-index-inflation-july/index.html

 

ET get in here and spin this for us.

 

Inflation was always going to fall. That’s what high interest rates do. Especially at the pace the Fed raised them. The question is, did they go too far? Time will tell, but they don’t have a great track record.

 

I’m not sure they went too far-rates are still in the historically “normal” range, but I think you can certainly make the case they were initially late to raise and now are somewhat late to reduce.

And I say that as someone who was crushed by these rate increases on construction loans for several large real estate projects that began with an interest rate of around 3% and ended with rates at about 8%. Brutal.

 

About a year ago you guys thought they weren't being aggressive enough, you basically wanted them to induce a recession. I don't suppose many will give Powell credit for threading the needle. Now at least everyone is on the same page about them being overly cautious? Everyone can high five now.

 

I feel your pain on the latter, as I am in finance as well. The Fed definitely waited too long to stop the easy money. Boggles the mind they were still printing money (QE) into 3.6% unemployment (March 2022). Should have been a surprise to no one that inflation took hold. As much as I too feel the pain of higher interest rates, I feel safer with the Fed reducing the balance sheet and staying with higher rates for too long versus what they did in 2021 and early 2022. They should have taken a more balanced approach then and we wouldn't have to be dealing with this now.

 

I have bitched and moaned about the Fed as much as anyone but they seem to either have landed the economy well.. or it's landed in spite of them. I'll give them the credit though.

 

The feds target inflation rate is 2% not 2.9.

 

Companies raise prices not the government. The tradeoff of going into recession to put people out of work is a terrible solution for companies' price grab. Best thing to do is have the market work it out by buying less soda until soda sellers lower prices (or whatever item you are disliking). Here is an example of what is happening which you can see isnt a rising demand for soda pushing up prices from an overstimulated economy... its a price grab:





Much Of This Pricing Activity Can Be Explained By Sellers’ Inflation
This is pressure from suppliers to increase prices. How? Professor Isabella Weber explains “that supply shocks allowed corporations to tacitly collude, hike prices, and rake in record profits…This is a form of implicit collusion,” she said. “Firms do not even need to talk to one another to know that a cost shock is a great time to raise prices.”

Alex Turnbull, a commodities analyst, echoes this, “When you go from 15 to 10 companies, not much changes. When you go from 10 to 6, a lot changes. But when you go from 6 to 4 – it’s a fix.”

And the record profits Professor Weber mentions? Groundwork Collaborative recently found that corporate profits accounted for 53% of 2023 inflation. EPI likewise concluded that over 51% of the drastically higher inflationary pressures of 2020 and 2021 were also direct results of profits. The Kansas City Federal Reserve even pegged this around 40%, indicating that sellers’ inflation is now a pretty mainstream idea.

Why Your Groceries Are Still So Expensive (forbes.com)

 

They need to go ahead and cut now to head off the recession, but they rarely act in anticipation.

 

What recession? There likely isn't one coming any time soon. And the FED is always slow to act. They would rather react to solve an issue versus act too fast and be the cause of any issues. It's in their mandate.

And with unemployment ticking up, and inflation ticking down, it's looking more and more like rate cuts are coming in Sept. Especially since housing is the last, lagging inflationary issue. One way to help is to cut rates, which lowers mortgage costs.