The latest U.S. inflation numbers have been released, and they indicate that prices continue to rise. According to the Federal Reserve Bank of San Francisco the rate of inflation in the US is higher than the majority of the rest of the world by more than 3 percentage points. This could explain why the US inflation rate is higher than the average worldwide rate for the past decade. Oscar Jorda (the bank’s senior policy advisor) warns against interpreting too much into these numbers. However, the overall picture is clear.
Different factors influence the inflation rate. The CPI is the price index used by the government to measure inflation. It is calculated by the Labor Department through a survey of households. It measures the amount spent on goods and services, however, it does not include non-direct spending which makes the CPI less stable. Inflation data should be viewed in the context of the overall economy and not in isolation.
The Consumer Price Index, which measures changes in prices of items and services is the most frequently used inflation rate in the United States. The index is updated each month and shows how prices have risen. This index provides a useful tool for planning and budgeting. Consumers are likely to be concerned about the cost of products and services. However, it is important to understand why prices are rising.
Production costs rise which, in turn, increases prices. This is often referred to as cost-push inflation. It is characterized by rising prices for raw materials for example, petroleum products and precious metals. It may also include agricultural products. It is important to remember that when the cost of a commodity rises, it also affects the price of the item in question.
Inflation statistics are often difficult to find, however there is a method that can aid in calculating the amount it will cost to purchase goods and services in a year. The real rate of return (CRR) is a better estimation of the nominal cost of investment. Be aware of this when you’re looking to invest in bonds or stocks next time.
The Consumer Price Index is currently 8.3 percent higher than the level it was one year ago. This is the highest annual rate since April 1986. Inflation is expected to continue to rise because rents comprise a significant portion of the CPI basket. Furthermore the increasing cost of homes and mortgage rates make it more difficult for many people to buy a home which increases the demand for rental properties. The possible impact of railroad workers on the US railway system could result in disruptions in the transport and movement 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 likely to increase by just a half percent in the next year. It’s hard to determine whether this rise is enough to control the inflation.
The core inflation rate which excludes volatile food and oil prices, is approximately 2 percent. Core inflation is reported on a year to year basis by the Federal Reserve. This is what it means when it states that its inflation goal of 2 percent is. The core rate has been below its target for a lengthy period of time. However it is now beginning to increase to a point that is threatening a number of businesses.