![]() ![]() It’s exactly this line of thinking from the Fed that continues to spur recession fears in consumers and investors – a fact that Mester acknowledges. My read right now is we’ll probably have to bring the nominal Fed funds rate up a bit above 4% by early next year, and then keep it there throughout the year.” Interest rate anxiety spurs recession fears Moreover, she believes that “the Fed is going to have to do much more to get that inflation data on that downward path…. Mester warned that she doesn’t “have enough evidence now to even conclude that inflation has peaked in the U.S.” She further cautioned that she’s “still very concerned about inflation,” as it remains at “unacceptably high levels.” On Friday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, echoed her agreement. George’s comments put numbers to the Fed’s intention to corral inflation fully, rather than pulling back at the first sign of lower prices. Her statement runs contrary to investor expectations that the Fed will approach – but not exceed – 4% by next summer before lowing rates again. Officials had already indicated that they were willing to lift interest rates an additional 0.75% in September prior to Tuesday’s inflation report to constrain economic growth and lower prices.Įsther George, president of the Federal Reserve Bank of Kansas City, suggested during a recent interview with Bloomberg Television that interest rates may climb above 4% and stay there for several months. Officials posit concerns ahead of Tuesday’s inflation reportĪlready this year, the central bank has spiked interest rates to a range of 2.25%-2.5% in its fight against inflation. Overall, prices are rising slower than they have been, but they’re still rising. There was a big fall in energy commodities like gasoline and other fuel oil, but a rapid increase in energy services like electricity and piped gas.Īlso driving the increase was a significant rise in prices for food, medical care, shelter and new vehicles. It rose by 0.6% to take the annual rate to 6.3%. The story was even worse for core inflation, which removes volatile products such as food and energy. It showed that prices have risen 8.3% over the past 12 months to the end of August. The Consumer Price Index was released this morning at 8:30 a.m. ![]() So, is inflation cooling down? The latest CPI data Between mid-June and Monday, gas marched down from $5.01 to just $3.71 per gallon of unleaded. On a broader scale, many have cited falling gas prices as the biggest driver of inflation declines. Particularly, he noted, “Rents – market rents and imputed rents on owner-occupied housing – are key drivers of all measures of core inflation.” Nobel Prize-winning economist Paul Krugman tweeted Sunday that he based inflation expectations on sluggish rent prices. All told, economists broadly predicted core CPI to land at 6% year-over-year. Core CPI projections sat a little higher, with gains of 0.3% after stripping out energy’s recent declines. That would bring inflation down between 8%-8.1%, compared to July’s 8.5%. Wall Street broadly expected that headline CPI would decline about 0.1% month-over-month in August. It’s not just the headline numbers that matter – the data inside gives a sneak peek into how different sectors of the economy fare against inflationary headwinds. Ahead of Tuesday’s inflation report, experts speculated that August’s inflation data would play into the Fed’s September rate hike decision. ![]()
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