by Neils Christensen
Kitco
April 4 (Reuters) – The largest impediment to the U.S. central bank’s efforts to return inflation to its 2% target rate is the persistence of outsized price increases in the housing services sector, Chicago Federal Reserve President Austan Goolsbee said on Thursday.
“The biggest danger to the inflation picture in my view… (is) the continued high inflation in housing services,” Goolsbee said in remarks at an event hosted by local business associations in Oak Brook, Illinois.
He added that based on market data on rents for new leases, “I have been expecting it to come down more quickly than it has. If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”
Payrolls are up again in the latest report, making the Fed’s job a little harder. So are wage gains! However, according to the latest Purchase Managers Index, prices paid on the services side of the economy by producers are down, which means inflation could come down. That’s if you believe it. But how can that be true when recent reports said the opposite and when rising employment coupled with rising wages indicates the opposite as well?
The stock market didn’t like that at all.
The price or the rate of exchange of one good in terms of another is the amount of the other good divided by the amount of the first good. In the money economy, price will be the amount of money divided by the amount of the first good.
The upcoming Consumer Price Index figures for March will be closely analyzed by Federal Open Market Committee members ahead of their next meeting on May 1. No change in interest rates is expected at the meeting. But relatively benign inflation data could pave the way for a summer interest rate cut, according to the expectations of most FOMC officials and fixed-income markets.
The Federal Reserve will see if inflation moves beyond its current rough patch before imposing highly anticipated interest rate cuts, Fed Chair Jerome Powell said on Wednesday.
(Bloomberg) — A dollar gauge saw its biggest drop in nearly four weeks on Wednesday as price pressures in the US services industry eased and Federal Reserve Chair Jerome Powell said he wants to see inflation move sustainably to the US central bank’s 2% goal before starting to lower interest rates.
On Monday’s broadcast of NBC’s “Today,” President Joe Biden responded to a question on what he would say to people whose money isn’t going as far due to inflation by saying, “we have the best economy in the world. We’ve got to make it better.” And “we’re going to find out that what happened as a consequence of the crisis we had on health is going to have a lasting effect. We’ve just got to get people to move again. We’re ready. I think the country’s ready to come together…I’m truly optimistic.”
Not long ago the rich world was braced for a costly battle with inflation. Today it can seem as if the war has been won bloodlessly. In most rich countries annual core inflation, which excludes volatile food and energy prices, has fallen from peaks of 5-8% to a more tolerable 3-5%. In defiance of pessimistic economists, there has been no accompanying economic slump. Growth varies from booming (America) to respectable (Australia, Canada, Japan) to tepid (Britain, the euro area), but nowhere has it collapsed. In contrast to the disinflation of the 1980s, unemployment has stayed low. Has the world economy enjoyed salvation without sacrifice? Sadly, the answer is no; high inflation has left scars.