Maria Irene
First, let’s talk about stagnant price growth. Analysts had been vocally divided on the topic of interest rate hikes for 2023. The recent data seems to bolster the argument that a rate hike is impending. While price growth is somewhat languid, this inertia provides fodder for economists who believe that the Federal Reserve should intervene to raise benchmark rates. Kathy Bostjancic, among others, opines that this “will keep the Fed hawkish and open to another rate hike.”
On the other side of the coin is the housing sector, which has seen an unexpected surge in inflation. According to economist Olu Sonola, the “uptick in housing inflation was the key surprise.” This spike has a domino effect, influencing the overall Consumer Price Index (CPI). Further complicating this situation is the resilience of the housing market to interest rate hikes, a defiance that contradicts prior expectations. So, while interest rates remain a hot-button issue, the housing market sings its own defiant tune.
In terms of sheer numbers, the rate of shelter cost increases has literally doubled, standing at 0.6% from the previous 0.3% in August. This comes at a time when median monthly rent prices in the United States have hit a record $2,052. With shelter inflation at 7.2%, it’s easy to understand why there’s a burgeoning sense of urgency surrounding these figures.
Let’s not forget the often-overlooked but alarming inflation in food items. With a current rate of 3.7%, this category has been grappling with inflated prices for over three years. When inflation in such a basic necessity remains unabated, questions about sustainability and quality of life inevitably rise.
And then, there’s the oil industry, soaring to new heights with US crude oil production hitting 13.2 million barrels per day. This is a 10% increase in production year-to-date and surpasses the previous record of 13.1 million barrels pre-pandemic. But could this be a potential panacea for the present energy conundrum? Given the complexity of the energy market, that’s still up for debate.
Juxtaposed against these indicators is the national debt, expected to hit a staggering $35 trillion soon. With spending on an uphill trajectory and tax receipts dwindling by 8%, something’s got to give for the economy to veer onto a sustainable path.
Many headlines simplify the issue to state that current inflation stands at 3.7%. However, this superficial glance ignores the cumulative effect of past inflation rates, including 8.2% in September 2022 and 5.4% in September 2021. Therefore, inflation over the past two years is nearly 20%. Peter Schiff’s recent comments about CPI further confirm that inflation is far from being tamed.
The key takeaway? Even as we see a minor easing in inflation, dubbed “disinflation,” it’s crucial to remember that prices are still on the rise. The Federal Reserve’s role in this chaotic situation is far from over, and the pieces on this economic chessboard are far from settled. As we navigate through this convoluted economic scenario, only time will tell how these intertwined factors will play out. But one thing is clear: we’re in for an intriguing ride.
