Category Archives: Inflation

Federal Reserve, Inflation, Interest Rates

Latest Fed minutes show concern over inflation

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That latest Federal Reserve minutes taken during the Fed’s August 5th meeting where they held interest rates steady indicates a concern over greater inflation risks into next year.

The Fed warned against inflation in their statement, but the minutes released Tuesday, August 25, better highlights the extent of their growing worry:

"Participants expressed significant concerns about the upside risks to inflation, especially the risk that persistently high headline inflation could result in an unmooring of long-run inflation expectations. Some viewed the upside risks to inflation as having diminished modestly over the intermeeting period, mainly as a result of the drop in the prices of oil and some other commodities as well as the greater likelihood of persistent economic slack.

However, others viewed these risks as having increased, particularly in light of continued elevated readings on headline inflation, the low level of the real federal funds rate, anecdotal information suggesting that firms were having more success in passing higher costs on to their customers, and some signs of an upward drift over recent months in investors’ expectations and uncertainty regarding inflation over the longer run; moreover, the recent decline in energy prices might well be reversed in coming months.

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Federal Reserve, Inflation, Interest Rates

Fed chief Bernanke forecasts moderate inflation

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Federal Reserve Chairman Ben Bernanke said inflation was on track to ease later this year and next. Bernanke made the comments Friday at an economic conference before leading economists and policymakers in Jackson Hole, Wyoming.

Decreasing commodity prices, increased stability of the dollar, and slower growth were cited reasons for the improved outlook.

"If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year," Bernanke said.

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Federal Reserve, Inflation, Interest Rates

Federal Reserve Chairman Ben Bernanke’s speech on Aug. 22, 2008

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Fed Chairman Ben Bernanke spoke before an annual economic conference in Jackson Hole, Wyoming on August 22, 2008. He touched on several economic items, but his soothing inflation message stood out most noticeably.

Bernanke forecasted moderate inflation, provisioned on commodity prices, growth and dollar stability factors.

The following is the prepared text of his speech, as provided by the Federal Reserve website.

Reducing Systemic Risk

In choosing the topic for this year’s symposium–maintaining stability in a changing financial system–the Federal Reserve Bank of Kansas City staff is, once again, right on target. Continue reading Federal Reserve Chairman Ben Bernanke’s speech on Aug. 22, 2008 →

Inflation, Interest Rates

Growing inflation: Wholesale prices jump to highest annual rate in 27 years

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The Producer Price Index (PPI), which measures prices at the factory door and inflation pressures before they reach the consumer, jumped 1.2% in July and 9.8% in the past year, according to a Labor Department report released Tuesday.

The 1.2% climb was double the rate economists expected and follows a 1.8% jump in June and a 1.4% rise in May. Core producer prices, which exclude food and energy, jumped 0.7 percent in July after a 0.2 percent June increase.

The rise in wholesale prices marks the highest annual rate since June 1981, or 27 years.

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Inflation, Inflation Rates

Inflation fastest in 17 years, rate climbs 5.6%

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The annual inflation rate climbed to 5.6% in July — the fastest growing rate in 17 years, according to Labor Department figures released Thursday.

Consumer prices jumped 0.8% in July, nearly double the level economists expected. It follows June’s 1.1% increase.

The biggest culprit in inflation’s increase was energy costs, which jumped by 4% on a monthly basis and 29.3% annually. On a somewhat optimistic note, the latest July figures include data collected only from the first three weeks, and do not account for the most recent commodity price decreases, like those seen in oil and gas.

“Energy prices do seem to be coming down a bit. So I’m hopeful that going forward we won’t see as much of an increase,” said UCLA economist Lee Ohanian. “That decline will translate into lower gasoline prices and lower prices across the board.”

However, the core CPI, which excludes volatile food and energy items, still experienced a 0.3% and 2.5% annual increase. Economists expected a 0.2% increase.

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Inflation, Interest Rates

Inflation helped by lower commodity prices

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The Fed and consumers may have less cause for worry over inflation as a continual fall in commodities gives everyone money to purchase more than gas and groceries.

In the last Federal Reserve meeting on August 4, the Fed said "inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities."

While commodity prices have increased, they are nowhere near their punishing spring highs. As an example, oil prices dropped Monday to a low of $112.72 a barrel. A far cry from its record high of $147.27 on July 11.

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Inflation, Inflation Rates, Interest Rates

Fed warns against inflation, but hold rates at 2%

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The Federal Reserve met Tuesday and did what most expected… nothing. Concern over both inflation and economic growth were voiced. But in the end, the Fed left the benchmark federal funds rate at 2 %, where it’s been since April.

The vote was 10-1, with a dissent from Dallas Fed President Richard Fisher, who wanted to increase rates to combat inflation, as he did in the last Fed meeting.

Based on the Federal Open Market Committee (FOMC) statement after the meeting, investors took measure and concluded the Fed would not raise rates in the near term either. Continue reading Fed warns against inflation, but hold rates at 2% →