Last week, the economy seemed all but certain to be on the mend. Now, not so much. The Federal Reserve is now more likely to hike rates some more, and it’s not clear that an end is in sight.
the Labor Department released its most recent report on the state of what we all pay to live around here in the U.S., and the annual inflation rate ticked up for the second straight month. Blame gas and rent for driving most of the surge, but most of the things we pay for got a little bit more expensive. When it was all tallied up, the Consumer Price Index — the government’s broad cost-of-living gauge — spiked up to 3.7 percent in August after sinking to a two-year low of 3 percent in June and 3.2 percent in July. This was pretty sharply higher than what most economists had expected.
The pessimistic view is that inflation isn’t over and the Federal Reserve is going to jump into action to keep raising interest rates — making, for instance, a new home even further out of reach. But dig deeper into the numbers and there appear to be limits to this. For one, these spikes in price are likely temporary. “The rise in gas prices in August was the largest contributor to headline inflation and will not likely show up again next month,” Jeffrey Roach, the chief economist for LPL Financial, wrote in a note. (It’s always worth taking predictions of “temporary” increases with a grain of salt, though. Remember that the Fed itself was dead wrong by mistakenly calling the early months of this inflationary period “transient.” And Saudi Arabia certainly doesn’t appear to be acting like the tighter global oil supply is just a passing fad.) The rise in shelter costs are, as I’ve noted before, outdated and based on a stodgy method.
