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Manufacturing Costs Surge, Undermining Hopes That Inflation is Cooling
by John Carney
Breitbart.com
Manufacturers in New York saw costs climb at the fastest pace in nearly two years, according to a Federal Reserve Bank of New York survey, a troubling sign that high inflation remains embedded in the economy.
The Empire State Manufacturing Survey for February showed a sharp increase in both prices paid and prices received by producers, indicating rising costs for raw materials and goods. The index for prices paid jumped 11 points to 40.2, its highest level since early 2022. The index for prices received, a measure of what businesses are charging for their goods, also rose for a second consecutive month.
The report follows a hotter-than-expected consumer price index (CPI) reading for January and adds to growing concerns that inflation is not cooling as quickly as the Biden administration and Fed officials had expected.
Is the U.S. Suffering From Seasonal Inflation Disorder?
January’s bad data needs further scrutiny; plus, Bessent’s bet bombs
by Chris Giles
FT
On the day of a poor set of US consumer price inflation data for January, Powell said the Fed had made “great progress” in getting inflation down but had not quite met its goals. He was quite right about the former, with US CPI inflation down from 9 per cent in June 2022 to 2.4 per cent in September 2024, but the latest data was bad.
US headline CPI inflation rose in January on a 12-month, six-month, three-month and one-month basis and almost all measures of core inflation were higher in January than in December over every time period.
BoJ Policymaker Calls for More Rate Hikes, Warns of Inflation Risk
by Leika Kihara
Reuters.com
TOKYO, Feb 19 (Reuters) – The Bank of Japan must raise interest rates more as keeping them at current low levels could cause excessive risk-taking and push up inflation too much, its board member Hajime Takata said, cementing expectations of further hikes in borrowing costs.
Long-term inflation expectations have been rising steadily and companies are becoming more active in passing on higher labour costs, Takata said, signalling that conditions for additional rate increases were falling into place.
Services prices are also being raised more frequently in a sign that price hikes have “taken root” in Japan, he said.
“Inflation is approaching the BOJ’s 2% target with positive corporate behaviour already observed,” Takata said in a speech, adding the BOJ must be mindful of upside risks to inflation.
How Will Tariffs Affect Inflation?
by Kristin Schwab
Market Place
This week will be chatty for Fed officials, with remarks scheduled from Federal Reserve bank presidents, governors and others. A topic that’s sure to come up: inflation and how tariffs might affect it.
In fact, it’s already come up. On Monday, Fed governor Christopher Waller said he thinks tariffs would only modestly increase prices and he favors “looking through these effects when setting monetary policy.” Chicago Fed President Austan Goolsbee — in previous remarks and on “Marketplace” — has warned that tariffs could increase inflation.
At the heart of the debate is the question: Do tariffs lead to one-time price increases, or do they lead to more persistent inflation?
To predict how tariffs might affect inflation, economist Stephanie Kelton at Stony Brook University said we need to know exactly what the tariffs will be.
U.S. Tariffs Will Keep Inflation ‘Sticky and High’ in 2025
by Madison Mills and Seana Smith
Yahoo! Finance
Uncertainty surrounding President Donald Trump’s policies, particularly tariffs and fiscal measures, could create significant challenges for US corporate earnings in the coming quarters.
BlackRock lead portfolio manager on the Global Tactical Asset Allocation (GTAA) team, Tom Becker, believes that while the Trump administration’s policies themselves are uncertain, it is the lack of clarity that is the main issue.
“I mean, in terms of how we’re positioned, we think US inflation is going to stay sticky and high,” Becker says to Catalysts hosts Madison Mills and Seana Smith.
Fed Policy Should Stay Restrictive Until There’s More Inflation Progress
by Reuters
Kitco
Feb 18 (Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Tuesday said that while there is no reason to be discouraged about bumpy and sometimes imperceptible progress toward 2% inflation, the U.S. central bank should keep short-term borrowing costs where they are until the progress is more visible.
“Policy needs to remain restrictive until … I see that we are really continuing to make progress on inflation,” she told a community banking conference hosted by the American Bankers Association in Phoenix, Arizona.
With the economy and labor market solid, “we want to be, in my judgment, careful … before we make the next adjustment” to ensure there is enough downward pressure on inflation, she said.
Fed’s Waller: Inflation Progress Has Been Slow
by Joshua Gibson
FX Street
Federal Reserve (Fed) Board of Governors member Christopher Waller noted late Monday that while inflation progress has been made, it has been “excruciatingly” slow.
Key highlights
Fed must not let uncertainty about policy paralyze action guided by data.
Inflation progress in past year excruciatingly slow.
Recent cpi disappointing, but could be the result of seasonally adjusted issues.
Cuts appropriate in 2025 if inflation repeats 2024 pattern.
Rising Rates May Trigger Financial Instability, Complicating Fight Against Inflation
Banking systems are largely insulated from inflation, but vulnerabilities at some banks could lead to tradeoffs between containing inflation and protecting financial stability
by Katharina Bergant, Mai Hakamada, Divya Kirti, Rui C. Mano
IMF
Our new research on the relationship between inflation and bank profitability helps us make sense of these concerns. Most banks are largely insulated from shifts in inflation—the exposure of income and expenses tend to offset each other. Yet some have significant inflation exposures, which may lead to financial instability if concentrated losses lead to wider panics in the banking sector. As several major central banks are reassessing their monetary policy frameworks in the aftermath of the post-pandemic inflation surge, a deeper understanding of the links between inflation and bank profitability can help design better monetary policy frameworks.
It Matters Even More: Central Bank Independence, Long-Run Inflation, and Persistence
by Angelos Athanasopoulos, Donato Masciandaro, Davide Romelli
CEPR
Central bank independence has recently re-emerged as a major concern within political economy discussions. This column shows that improvements in central bank independence yield long-lasting benefits, with a significantly greater impact on inflation in the long run compared to the short run. Additionally, it shows that central bank independence reduces inflation persistence, thereby enhancing the effectiveness of monetary policy. Finally, and in contrast to much of the existing literature, it finds that the long-term effects of central bank independence on inflation are more pronounced in developing countries.
Why Egg-flation Could End Up Being a Headache for the Fed: Morning Brief
by Julie Hyman
Yahoo! Finance
Everyone has an egg story lately.
My local Trader Joe’s has been entirely out of eggs for several weeks, so I ended up buying a couple dozen close to work and carting them home on the train. A colleague paid $12 for a dozen eggs at his grocery store in Queens.
And Waffle House, that hurricane-seriousness bellwether, is reflecting the egg-flation storm with a 50-cent surcharge.
It’s not just anecdata. Avian flu has created a severe egg shortage, driving up prices by 15% from December to January alone — for a whopping 53% change from January 2024. As our Brooke DiPalma reported, the USDA predicts egg prices could climb a total of 20.3% this year.