Producer Price Rise Belies Inflation Rut?

Recent headline read future “producer prices rise more than expected.” You think? Just came back from grocery store where 12 pack of 12-oz Pepsi cost $9.29 & Quaker Granola Cereal $6.99. So, is inflation “easing” or not?

On Tuesday morning, the markets jumped 2% on the unexpected news that inflation “eased significantly” to 7.1% last month. Yet, just a day earlier Wall Street reacting badly to earlier contradictory reports. As the WSJ noted at the time, that this & other [recent] data releases “have served as a reminder of just how difficult it is to call when inflation will ease” in the long run.

Now comes the real world nitty gritty. Will the Federal Reserve Board “pump the brakes on its policy” of raising its own interest rates aggressively as many worried about a recession more than inflation have urged? As it were, the Fed HAS signaled it would likely raise rates “only” .50 rather than .75 base pts in its next meeting on Wednesday as it had been doing since summer. And, with last month’s inflation easing more than expected (although 7.1% inflation is still very high], the Fed’s next interest rate decision appears likely to keep to that .50% maybe promise. But, what about next month or the month after? “Even though the market sometimes seems to ignore [Chairman] Powell, thinking he’s bluffing, he keeps reiterating that he will put this economy into a recession if he has to,” said Eric Sterner, chief investment officer at Apollon Wealth Mgt. “We’re stuck in this rut right now waiting for inflation to normalize and it may [still] take all of next year for that to happen.” So, what does that mean for the New Year’s cost of a 12-pack of Pepsi or Quaker Granola Cereal?

Davd Soul