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 the rate of inflation in the US is higher than the majority of the of the world by more than 3 percentage points. This could be the reason why the US inflation rate has been higher than the average global rate for the past decade. Oscar Jorda (the bank’s senior policy advisor) cautions against interpreting too much into these numbers. However, the overall picture is clear.
Different factors determine the rate of inflation. The CPI is the price index used by the government to gauge inflation. It is calculated by the Labor Department through a survey of households. It measures spending on goods and services but it doesn’t include non-direct expenditure which makes the CPI less stable. This is the reason why inflation data should always be considered in context, rather than in isolation.
The Consumer Price Index, which measures changes in prices of products and services is the most widely used inflation rate in the United States. The index is updated every month and shows how much prices have risen. The index is a helpful tool to plan and budget. If you’re a consumer, you’re probably thinking about the price of goods and services but it’s important to know why prices are going up.
The cost of production goes up and prices rise. This is sometimes referred to as cost-push inflation. It is the rising price of raw materials, like petroleum products or precious metals. It can also involve agricultural products. It is important to keep in mind that when prices for a commodity increase, it will also affect the value of the commodity.
It’s not easy to find inflation data. However there is a method to estimate the cost to buy items and services throughout an entire year. The real rate of return (CRR), is a better estimate of the nominal annual cost of investment. With this in mind, the next time you’re seeking to buy stocks or bonds make sure to use the actual inflation rate of the commodity.
At present the Consumer Price Index is 8.3 percent higher than the year before. This is the highest rate for a year since April 1986. Inflation will continue to rise because rents make up a large part of the CPI basket. Inflation is also driven by rising home prices and mortgage rates which make it more difficult to purchase an apartment. This drives up the demand for housing rental. Furthermore, the potential for rail workers impacting the US railway system could cause a disruption in the transportation of goods.
The Fed’s short-term interest rate has increased to the 2.25 percent level this year from its near zero-target rate. The central bank has predicted that inflation will increase by just a half percentage point over the next year. It’s difficult to tell whether this rise is enough to control the rising inflation.
The rate of inflation that is the core which excludes volatile oil and food prices, is about 2 percent. Core inflation is often reported in a year-over year basis and is what the Federal Reserve means when it states that its inflation goal is 2percent. In the past, the core rate has been below the goal for a long time but recently it has started increasing to a point that has caused harm to many businesses.