The Consumer Price Index as we have talked about in class - Is the prices consumers pay for a wide variety of goods and services. Today, October 13th the CPI information was released and rose more than expected as inflation has weighed on the US economy. The CPI rose 0.4% in the month of September which is more than the expected 0.3% Dow Jones Estimate. This puts the year-over-year inflation at 8.2% which is not the highest its been but some of the highest levels since the 1980s. The Federal Reserve has been trying to combat inflation with its interest rate increases. This is significant because although the aggressive efforts from the Fed to get prices under control it still seems as if they can't. For context since March, the Fed has increased interest rates a full 3%. With today's CPI information released, we can expect that the Fed for the fourth consecutive month will increase the interest rates by .75% next time they meet November 1st-2nd. Although the Fed is trying its best - the consumer is still purchasing through inflation and on Friday Oct 14th the Commerce Department and Census Bureau release September’s retail sales report. The data, which is not adjusted for inflation, is expected to show a monthly increase of 0.3%, and no change when excluding auto sales. This makes it hard for the Fed to rebalance the economy if the spending habits of the American consumer are staying relatively the same despite inflation increases.
Source: https://www.cnbc.com/2022/10/13/consumer-price-index-september-2022-.html
JJ Maxwell,
ReplyDeleteThe CPI is something we have spoken about during our class discussions but is something I had yet to see raw data on. This post provides me with that raw data. I would like to add that you did a very good job in explaining not just what the CPI had risen to and what it was before but you also voiced the effects of this increase in CPI. I have been up to date on the Interest rates within the economy and I would mention that the fed is willing to do anything to combat inflation in hopes to reaching that 2% mark that Powell would like to see. It is interesting that we may see yet another increase in Interest rates, which will have a large impact on the stock market and show an increase in the purchase of government bonds. Overall, very good post.
I read an article that interest rates may be at 5% next year. I think many expect rates to continue to increase to fight off inflationary pressures. With some experts saying that economic activity is still going strong, I wonder if we will start to see more noticeable slowdowns in the economy as interest rates may continue to rise.
ReplyDeleteThe CPI is a very useful for determining the overall increase in price levels, but we have also discussed in class that CPI can overestimate the inflation rate because the representative basket of goods and services evaluated by the Bureau of Labor Statistics does not change from month to month. This is an important distinction to mention because many consumers will choose substitutes based on increased price levels that will not be shown in the CPI. Given that increased efforts from the Federal Reserve to combat inflation through an increase in the interest rate has not been as successful as expected, do you expect that the Federal Reserve will begin to use other forms of monetary policy to encourage saving on the part of consumers?
ReplyDeleteYou are correct in describing the action the Federal Reserve has been taking as aggressive. By raising interest rates to the highest they have been in a long time in order to combat inflation. After the next interest rate increase this week, it will be interesting to watch inflation's response to it as well as the response by the public if they support these measures that are making borrowing very expensive.
ReplyDeleteI'm curious as to why this process of lowering inflation has taken a little while now. Reasons such as "supply shortages" are always mentioned, but shouldn't the decreasing of the money supply at least combat some of the inflation we are seeing at this point? Or offset some of the price increasing caused by these supply shortages?
ReplyDeleteOverall a great post. My article for the month covered a similar topic and focused on inflation increasing despite the FED enacting its policy with higher interest rates. I see that being a common theme in a lot of the posts from the class this month and I feel as though that shows the importance of it, especially to us as college students who will soon be entering the professional world.
ReplyDelete