The New York Times reported on January 23rd that inflation has been consistently slowing for six consecutive months which is a good sign for consumers, but leaves many questioning how the Fed will respond. The article primarily relied on Consumer Price Index (CPI) to support their statements, but also discussed changes in the Producer Price Index (PPI) and the Core Consumer Price Index.
The CPI is typically what the average person refers to when discussing inflation, but it is important to understand that CPI can be volatile due to food and gas prices that fluctuate at a greater rate than most durable goods. For this reason, the Core CPI removes gas and food prices to better understand how products outside of those volatile goods are impacted by rising prices. Finally, the PPI is a measure of price levels based on what domestic producers charge and receive for goods and services.
The article describes that inflation (CPI) has slowed down to about 6.5 after reaching a peak of about 9 in the summer of 2022. The Core CPI, however, has not been consistently decreasing for the last six months and instead is currently sitting at 0.3% month-to-month. 0.3% is a faster rate than the 0.2% month-to-month increase before the pandemic, but has come down significantly since reaching about 0.9% in April of 2021.
In terms of policy response, the Federal Reserve will likely continue to increase interest rates, but may increase by .25 rather than .5 or .75 as they have done previously.
https://www.nytimes.com/2023/01/23/business/economy/inflation-turning-point.html
2 comments:
Great article Brittani! The Fed did infact end up raising interest rates by 0.25 and may even raise them again in March to counter this inflation, as prices are still rising. However, seeing how you stated that inflation is almost down to its pre-pandemic rates at 0.3%, I wonder if the Fed will infact raise them again so soon as March is just a month away.
Nice Post. It is easy to see that inflation is still trying to stabilize after COVID, and I would be interested to see a chart that shows the ups and downs and how extreme they have been since COVID when examining inflation.
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