Tag Archives: inflation

A Statement for Everyone

The Federal Open Market Committee (FOMC) voted unanimously to do nothing and signal nothing at the January meeting. The committee upgraded its assessment of the economy to reflect what was most likely a strong end to 2014. That said, members also acknowledged that wage growth, inflation and the housing market remain cooler than they would [...]

Answers to frequently asked questions about inflation

Inflation cycles are just that, cycles.  The surging stagflation of the late 1980s persisted even after growth slowed; it took back-to-back recessions (which inflicted enormous pain), induced by the Federal Reserve (led by Paul Volcker at that time) to break the back of that vicious cycle. The 1990s gave us a virtuous cycle with globalization and [...]

CPI Runs Hotter than PCE Inflation Index

The Federal Reserve prefers to use the Personal Consumption Expenditures (PCE) index of inflation because PCE is more accurate; it better captures the trade-offs that consumers make when prices shift across sectors in the economy. The chart below is proof of the positive effect of plummeting oil prices in surging consumer sentiment. Low prices at at the [...]

Consumer Price Inflation Falls

The Consumer Price Index (CPI) dropped 0.4% in December, the largest drop since 2008, in large part due to plummeting oil prices. Energy prices outside of the oil and gasoline sectors, however, posted mostly increases, which look to be transitory and will retreat as we move into January. Prices for food moved higher and, outside [...]

Fed Statement Evolves but Policy Unchanged

The Federal Open Market Committee (FOMC) erred on the side of caution by keeping the phrase “considerable time” in the statement, but not using it to describe policy moves going forward. Instead, members said they would be “patient” in raising rates. The change in verbiage is a bit of a bait-and-switch as the FOMC preps [...]

CPI Slips on Falling Oil Prices

The Consumer Price Index (CPI) fell 0.3% in November, pushed down by the largest drop in prices at the pump since the height of the financial crisis in December of 2008. The CPI rose a negligible 1.3% from a year ago, once again driven down by low gas prices. Food prices rose 0.2% during the [...]

There Is More to a Flat CPI than Flat Prices

The index for consumer prices (CPI) was flat in October but 1.7% higher compared to one year ago. On the surface, today’s data suggest that inflationary pressures remain contained. Prices seem to have found a bottom, which may ease some of the worries about deflationary trends that have circulated in recent months; at the very [...]

Tipping Point for Wages

The employment cost index rose 0.7% in the third quarter, more than expected after rebounding from the doldrums in the second quarter. The index rose 2.3% from a year ago on the heels of slightly stronger wage growth; benefit costs for employers actually decelerated from a year ago.

Frightening Consumer Spending Data

Personal consumer outlays dropped 0.2% in September from August, reinforcing the negative read that the recent retail sales report provided for us. A shortfall in retail sales in September was one of the factors that triggered a selloff in the stock market earlier this month when traders feared that the U.S. consumer couldn’t play the [...]

Inflation Still Too Low

The Consumer Price Index (CPI) edged up 0.1% in September, after falling slightly the month prior. Increases in food prices tempered the drag from plummeting energy prices. This raises issues for consumers at the grocery store, as they will likely divert some of the money they are saving at the pump to deal with higher [...]