The cost of imported goods jumped two percent as American buying power dimmed further amid the biggest jump in inflation in 40 years, Department of Labor data showed Wednesday.
This was the biggest jump in import prices in 11 years and follows last week’s report showing that the Consumer Price Index rose 0.6 percent in January and 7.5 percent compared with a year earlier.
While higher fuel prices helped push up the headline figures, even absent fuel prices rose 1.4 percent. That’s the most ever recorded in data going back to 2001.
Economists had been expecting a 1.2 percent rise in import prices in January. Compared with a year ago, prices are up 10.8 percent.
Foreign purchases are also competing more for U.S. goods. Prices of exports rose 2.9 percent in the month. Prices are up 15.1 percent compared with a year ago, indicating that inflationary pressure has continued to climb as eco …
Federal Reserve officials have their work cut out for them persuading businesses that they can bring inflation under control in the coming year.
The Federal Reserve Bank of Atlanta’s measure of business expectations for inflation showed that on average firms in February expect to raise prices 3.6 percent, a significant increase.
This measure has been climbing steadily for over a year now, taking a brief breather last summer when the Delta variant triggered a surge in Covid-19 infections. The Fed’s pivot to removing accommodation late last year and expectations that the Fed will raise its interest rate target in March has not calmed inflation.
Year-Ahead Inflation Expectations
Some economists, including many at the Fed, think that inflation expectations have a powerful influence on the direction of prices. As consumers and businesses expect more inflation, they seek to raise their own prices (or, in the case of workers, wages) to keep up with rising costs.
Prices of derivatives that allow investors to speculate on the Fed’s next move currently show a 56 percent chance of a fifty-basis point hike at the March meeting. A basis point is one-hundredth of a percent. That is twice as large of a hike as many Fed watchers were expecting as the year began.
The survey covers businesses in the Sixth District of the …
www.breitbart.com/economy/2022/02/16/atlanta-fed-business-expectations/
As the greatest inflation spike of the last 50 years occurs, the utter failure of economists, their models and many pundits to foresee what was coming is worth highlighting. Of course, the biggest malfunction in the story was that of the Federal Reserve itself, which had a clear mandate to keep prices stable, and seems surprised by their lack of stability.
It’s no understatement to say that the Fed failed to properly anticipate the inflation surge. On Feb. 8, 2021, Raphael Bostic, the president of the Atlanta branch of the Fed, said, “I’m really not expecting us to see a spike in inflation that is very robust in the next 12 months or so.” A few days later, Boston Fed President Eric Rosengren echoed this sentiment, noting that he would be “surprised” to see broad-based inflation sustained at a level of 2% before the end of 2022.
As the saying goes, problems often start at the top. When testifying before the House Financial Services Committee in February 2021, Fed Chair Jerome Powell predicted that it might take more than three years to hit the 2% inflation goal.
The Federal Reserve is set to hike interest rates this year for the first time since 2018 to address the worst inflation in 40 years spurred by the coronavirus pandemic.
Consumers already hit with higher prices might be wondering how it will help cool off rising costs.
In January, the consumer price index surged 7.5% on the year, more than economists expected and the fastest gain since February 1982. It also marked the fourth month in a row of record price increases.
www.cnbc.com/2022/02/15/why-the-fed-raises-interest-rates-to-combat-inflation.html