The most recent U.S. inflation numbers have been released and show that prices continue to increase. According to the Federal Reserve Bank of San Francisco the rate of inflation in the US is higher than that of the rest of the world by more than 3 percentage points. This could be the reason why the US inflation rate is higher than the global average rate over the last decade. Oscar Jorda (the bank’s senior policy advisor) warns against reading too much into these percentages. The overall picture is evident.
Inflation rates are determined by a variety of factors. The CPI is the price index that is used by the government to determine inflation. It is calculated by the Labor Department through a survey of households. It is a measure of spending on goods and services, but it doesn’t include non-direct spending which makes the CPI less stable. Inflation data should be considered in context and not isolated.
The Consumer Price Index, which measures changes in prices of products and services is the most frequently used inflation rate in the United States. The index is reviewed every month and shows how prices have risen. The index gives the average cost of both goods and services which is helpful for planning budgets and planning. If you’re a consumer you’re probably thinking about the price of products and services, but it’s important to know why prices are rising.
The cost of production rises which raises prices. This is sometimes referred as cost-push inflation. It is a rising cost of raw materials, like petroleum products or precious metals. It can also affect agricultural products. It’s important to know that when the price of a commodity rises, it also affects the cost of the item being discussed.
Inflation statistics are often difficult to come by, but there is a method to help you calculate how much it costs to purchase goods and services in a year. The real rate of return (CRR), is a better estimate of the nominal annual investment. With that in mind the next time you’re looking to buy bonds or stocks make sure to use the actual inflation rate of the commodity.
The Consumer Price Index is currently 8.3% higher than the level it was a year ago. This is the highest annual rate since April 1986. Because rents make up an important portion of the CPI basket, inflation will continue to rise. Additionally, rising home prices and mortgage rates make it more difficult for a lot of people to purchase homes which in turn increases the demand for rental accommodation. Furthermore, the potential for rail workers affecting the US railway system could cause a disruption in the transportation of goods.
The Fed’s short-term rate of interest has increased to the 2.25 percent level this year from its near zero-target rate. According to the central bank, inflation is likely to increase only by half a percent in the next year. It is difficult to predict whether this rise will be sufficient to control inflation.
The core inflation rate which excludes volatile food and oil prices, is approximately 2 percent. Core inflation is reported on a year over year basis by the Federal Reserve. This is what it means when it declares that its inflation target of 2% is. The core rate has been in the lower range of its target for a lengthy time. However it is now beginning to increase to a point that is threatening many businesses.