Price increases remained uncomfortably rapid in August as a broad array of goods and services became more expensive even as gas prices fell, evidence that the sustainable inflation slowdown the Federal Reserve and White House have been hoping for remains elusive, reports the New York Times.
Inflation Remained Stubbornly High in August, Rattling Consumers and Investors (New York Times)
Excerpt from the New York Times: Prices rose 8.3 percent from a year earlier, a fresh Consumer Price Index report released on Tuesday showed. While slightly better than July’s 8.5 percent, the rate was not as much of a moderation as economists had expected as rent costs, restaurant meals and medical care became more expensive. Compounding the bad news, a core measure of inflation that strips out gas and food to get a sense of underlying price trends accelerated more than forecast. Stocks plummeted on Tuesday, with the S&P 500 falling 4.3 percent — its biggest drop since the depths of the pandemic in 2020 — as the data appeared to cement the case for another unusually large interest rate increase of three-quarters of a percentage point at the Fed’s meeting next week. Investors speculated that officials could even opt for a more drastic adjustment of a full percentage point this month or extend their campaign of swift rate moves for longer.
Embed from Getty ImagesIn a related story, also from the New York Times, President Biden gathered with top Democrats at the White House on Tuesday to celebrate their inflation fight at an inopportune moment, as a sobering new report showed just how far the economy still has to go to bring soaring consumer prices under control.
Sobering Inflation Report Dampens Biden’s Claims of Economic Progress (New York Times)
Excerpt from the New York Times: The Consumer Price Index report for August contained a large dose of unwelcome news for the president, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. It showed that inflation had not cooled as White House economists and other forecasters had hoped, and that workers had lost buying power over the last year as prices increased faster than wages. Another report, from the Census Bureau, showed that the typical American household saw its inflation-adjusted income fall slightly in 2021 from 2020. Perhaps more troubling for a president who has promised to close the gap between the very wealthy and the middle class, it showed that income inequality increased last year for the first time in a decade. These developments challenged Mr. Biden’s renewed efforts to reframe the economy as a winning issue for him and his party before the midterms.
Embed from Getty ImagesIn another related story from the Wall Street Journal, mortgage rates topped 6% this week, their highest level since 2008. The average rate on a 30-year fixed mortgage climbed to 6.02%. The last time rates were this high was in the heart of the financial crisis almost 14 years ago, when the U.S. was deep in recession.
Mortgage Rates Top 6% for the First Time Since the 2008 Financial Crisis (Wall Street Journal)
Excerpt from the Wall Street Journal: The jump in mortgage rates is one of the most pronounced effects of the Federal Reserve’s campaign to curb inflation by lifting the cost of borrowing for consumers and businesses. Already, it has ushered in a sea change in the housing market by adding hundreds of dollars or more to the monthly cost of a potential buyer’s mortgage payment, slowing what was a red-hot market not so long ago. Higher rates are forcing some would-be buyers to continue renting. Other buyers are skimping elsewhere to make their mortgage payments. The Fed is in a delicate dance. Investors hope it can cool the economy without tipping the U.S. into recession. The Fed is expected to keep raising rates aggressively when it meets next week, especially after Tuesday’s inflation report showed that consumer prices are still rising quickly.
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