The latest U.S. inflation numbers are out and they show that prices are still rising. Inflation in the US is outpacing most of the world by more than 3 percentage points, according to the Federal Reserve Bank of San Francisco. This could explain why the US has outpaced the world’s average rate of inflation over the last decade. Oscar Jorda (the bank’s senior policy advisor) cautions against interpreting too much into these percentages. The overall picture is clear.
Inflation rates are determined by a variety of factors. The CPI is the price index that is used by the government to measure inflation. The Labor Department calculates it by surveying households. It measures spending on goods or services but does not include non-direct expenditure 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 is a measure of price changes for products and services, is the most commonly used inflation rate in the United States. The index is updated every month and provides a clear overview of how much prices have increased. The index gives the average cost of both goods and services which is helpful to budget and plan. If you’re a consumer, you’re probably thinking about the costs of goods and services but it’s important to know the reasons for price increases.
Production costs rise and this in turn increases prices. This is sometimes referred as cost-push inflation. It is a rising cost of raw materials, including petroleum products or precious metals. It can also impact agricultural products. It’s important to note that when the cost of a commodity increases, it also affects the price of the item being discussed.
It’s not easy to find data on inflation. However there is a method to estimate the amount it will cost to purchase products and services over the course of a year. The real rate of return (CRR) is a better estimation of the nominal cost of investment. Keep this in mind when you’re planning to invest in stocks or bonds next time.
Currently the Consumer Price Index is 8.3 percent higher than the year before. This is the highest annual rate since April 1986. Since rents comprise a large part of the CPI basket, inflation is likely to continue to rise. In addition, rising home prices and mortgage rates make it more difficult for many people to buy homes, which drives up the demand for rental accommodation. The possible impact of railroad workers on the US railway system could cause interruptions in the transportation and movement of goods.
The Fed’s short-term interest rate has risen to the 2.25 percent rate this year from its near zero-target rate. The central bank has predicted that inflation will rise by just a half percentage percent in the coming year. It’s difficult to tell if this increase will be enough to contain the rise in inflation.
The core inflation rate that excludes volatile food and oil prices, is approximately 2 percent. Core inflation is usually reported on a year-over-year basis and is what the Federal Reserve means when it declares its inflation target to be 2%. The core rate has been in the lower range of its target for a lengthy time. However it has recently begun to rise to a level that is threatening a number of businesses.