The most recent U.S. inflation numbers are out and they show that prices are still rising. According to the Federal Reserve Bank of San Francisco inflation rate in the US is higher than that of the of the world by more than 3 percentage points. This could be the reason why the US inflation rate is higher than the average worldwide rate over the past decade. Oscar Jorda (the bank’s senior policy advisor) cautions against reading too much into these percentages. The overall picture is evident.
Inflation rates are determined by various factors. The CPI is the price index that is used by the government for measuring inflation. It is calculated by the Labor Department through a survey of households. It is a measure of spending on goods and services but does not include non-direct spending which makes the CPI less stable. Inflation data must be considered in relation to other data and not as a stand-alone figure.
The Consumer Price Index, which measures changes in prices of goods and services is the most frequently used inflation rate in the United States. The index is updated every month and shows how much prices have risen. This index is a valuable tool to plan and budget. Consumers are likely to be concerned about the cost of products and services. However, it is important to understand why prices are rising.
The cost of production rises which raises prices. This is often referred to as cost-push inflation. It’s caused by the rising of raw material costs, such as petroleum products and precious metals. It may also include agricultural products. It is important to remember that when prices for a commodity increase, it will also affect the value of the commodity.
Inflation statistics are often difficult to find, however there is a method that will help you calculate how much it costs to buy goods and services in a year. The real rate of return (CRR), is a better measure of the nominal cost of investment. With that in mind, the next time you are planning to purchase stocks or bonds ensure that you are using the actual inflation rate of the commodity.
Presently the Consumer Price Index is 8.3 percent higher than the year before. This was the highest rate for a single year since April 1986. Because rents make up a large part of the CPI basket, inflation will continue to increase. Inflation is also caused by the rising cost of housing and mortgage rates, which make it more difficult to purchase a home. This causes a rise in the demand for rental housing. Further, the potential of railroad workers affecting the US railway system could result in disruptions in the transport of goods.
From its close to zero-target rate, the Fed’s short term interest rate has increased this year to 2.25 percent. According to the central bank, inflation is expected to increase by just one-half percent over the coming year. It is hard to determine the extent to which this increase will be enough to manage inflation.
Core inflation excludes volatile food and oil prices and is approximately 2 percent. Core inflation is reported on a year-over- basis by the Federal Reserve. This is what it means when it says that its inflation goal of 2% is. The core rate has been in the lower range of its target for a long period of time. However it has recently begun to increase to a point that is threatening a number of businesses.