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Key point: “ Much of inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. ” This has nothi
by dopylitty 4y ago
Key point: “ Much of inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. ”
This has nothing to do with monetary policy.
- mc32 4y agoYeah unfortunately “energy” is a significant cost for most economic activity. Yours beginning to see “we’ve tried to hold back increases as much as possible but we can’t any more and we’re raising prices”. Yet core inflation is 5% which is also very high.
- deleted 4y ago[deleted]
- junofan 4y agoFed’s expected to raise interest rates in response, so perhaps it does.
- mjburgess 4y agoThey're still very far off actually making a difference, ie. you'd want the rate within 2% of the observed inflation, so c. 7% I think they'll stop long before that because even at 10%, they're not going to be able bring inflation down -- most of the causes being supply-side
- IggleSniggle 4y agoLast time USA had a real inflation problem, Jimmy Carter pushed the fed and they jumped rates to 20%. That stopped inflation, as well as Carter’s re-election.
- mc32 4y agoBiden’s own party is having cold feet about him running again. I don’t think they’ll make it viable for him to run. They’ll let the rumors fly and allow someone else to be the nominee. So he need not think about implication on his re-election as there won’t be any.
- IggleSniggle 4y agoGreat point. He didn’t really seem to want to be Pres anyway. Not that the Pres has all the much power over the economy anyway, but hopefully since he probably doesn’t have anything to lose anyway, he’ll simply push towards the best thing for the country rather than best thing for re-election or party.
- PenguinCoder 4y agoLet's be honest here; most of the cause, is corporate greed.
- worker_person 4y agoPeople will always be greedy. Pretending otherwise is delusional. Forcing people compete and provide the best / cheapest product with the fewest resources is how wealth is built up for all. Rich and Poor. Letting companies that are inefficient fail and go out of business is how you manage them. Government picking winners and losers is how you screw everything up.
- mc32 4y agoIt seems consensus is calling for something like 3.5 to 3.75. But it’s all speculation.
- _heimdall 4y agoInterest rates can actually bring down supply-side inflation. With most things being bought on debt, making that money drastically more expensive will eventually erode demand. With demand falling it brings it better inline with the lower supply levels, easing the inflationary pressure on prices. The same downside to all of economics still applies though. We can't actually predict what will happen and the larger the changes made the bigger the unintended consequences we will see down the road.
- mjburgess 4y agoSure, i suppose inducing a recession does bring prices down, eg., oil dropping is now just a recession in demand. Fair point.
- _heimdall 4y agoIt really sucks when it's phrased so directly like that, but yeah that's basically it. Slowing down inflation means causing a lot of pain along the way, no matter how you go about it
- dwater 4y agoPerhaps not, but energy is the "everything killer" of inflation since it's a major input to nearly every business that happens in the physical world (and it's non-trivial for the virtual world as well).
- jonasdegendt 4y agoI'm in Europe and I had a very favorable energy contract for the last couple of years. Well, that contract ended and my rates got hiked 800%. It sure put everything I do on a daily basis inside of the house into perspective.
- ianai 4y agoImagine if we had a fully electrified economy instead of this petrol-economy crap. There was a period where prospectors tried to hurry up and hoard all the uranium deposits they could find only to discover the stuff occurs at a rate to not be economical. (And supposedly covering an area the size of NM with solar would provide all the worlds energy needs.)
- lotsofpulp 4y agoThis is how you get the electrified (or whatever else) economy. Without the pain of higher fossil fuel prices, there is little incentive to change.
- ianai 4y agoI’ve taken to calling gas “conflict fuel” to remind myself to avoid using it as much as possible in my daily life. Helps more than just a desire to not impact the climate.
- dannyw 4y agoI don't really care, I will use whatever energy source is the cheapest. Subsidise green energy or tax dirty energy so that's true, and people like me will naturally switch.
- ianai 4y agoOr else why would you reply, right?
- galangalalgol 4y agoThe nickel wars are coming to fuel the battery factories.
- epistasis 4y agoBatteries have a lot more flexibility outside of lithium. LFP batteries don't have nickel and work well enough for cars.
- TSiege 4y agoWonder if the Fed will start paying for solar and heat pumps to help curb inflation /s
- candiddevmike 4y agoWonder how bad natural gas prices will be this winter.
- TrackerFF 4y agoEuropean countries are preparing for (energy) rationing. Record heat does not help either. Consumers in neighboring countries, like Norway, are experiencing almost 100-fold increases in energy prices as a lot of energy is being exported. I'd be amazed if American energy firms aren't exporting LNG hand over fist to EU countries, as the situation is as dire as ever.
- cbanek 4y agoSadly there have been some problems at the export terminals for LNG to Europe. That's caused the price of natural gas to go down a lot in the US and up in Europe. Yet another displacement. https://www.npr.org/2022/06/10/1104118546/freeport-natural-gas-terminal-texas-explosion-offline-shutdown https://www.npr.org/2022/06/10/1104118546/freeport-natural-g...
- akg_67 4y ago> I'd be amazed if American energy firms aren't exporting LNG hand over fist to EU countries, as the situation is as dire as ever. Unfortunately, Freeport LNG terminal, the 2nd largest terminal in country, had fire and not expected to be fully operational until early next year. So even if US can produce more natural gas, they just don't have enough available capacity to export. https://www.reuters.com/business/energy/us-regulator-finds-unsafe-conditions-freeport-lng-export-facility-bars-restart-2022-06-30/ https://www.reuters.com/business/energy/us-regulator-finds-u...
- volkl48 4y agoShort-term at least, the US is relatively limited on LNG export capacity (and the facility that had an equipment failure basically cancels out the projected increases for this year until it's fixed). https://www.eia.gov/todayinenergy/detail.php?id=50598 https://www.eia.gov/todayinenergy/detail.php?id=50598 AFAIK there's not exactly an abundance of idle ships to transport LNG either.
- usrn 4y ago>It's just gasoline >It's just housing >It's just plywood >It's just food Humans are biological, liebig's law of minimums applies.
- Barrera 4y ago> This has nothing to do with monetary policy. How can you be so certain? Gasoline prices started rising well before the war: https://fred.stlouisfed.org/series/GASREGW https://fred.stlouisfed.org/series/GASREGW I would agree that the war has made a bad situation worse. But to say this has "nothing to do with monetary policy" seems like a stretch.
- gizmo686 4y agoMost of the pre-war rise was recovering from the covid crash of gas prices. The price overshot its pre covid level a bit, but that can be explained through supply issues (you can't increase production on a dime; demand was difficult to predict; and suppliers prefer to under produce than over produce)
- worker_person 4y agoWe have a president who is hostile to oil. Let's ignore if that is a good / bad idea for moment. It's been long enough that price of gas reflects those decisions. Except we've been drawing down our strategic oil reserves to keep prices cheap for the moment. So really it should be a lot higher. Real pain will begin when the reserve runs out of good oil. https://www.washingtonpost.com/business/energy/the-us-is-depleting-its-strategic-petroleum-reserve-faster-than-it-looks/2022/06/17/3b899c40-ee04-11ec-9f90-79df1fb28296_story.html https://www.washingtonpost.com/business/energy/the-us-is-dep...
- jbay808 4y agoGas is pulling up the CPI right now, but it's always volatile. Shelter is slow, strongly linked to monetary policy, and the highest-weighted component in the CPI basket, and it's up 5.6% YoY, with a lot of inertia to keep growing. That suggests to me, in a back-of-a-napkin way, that about half of the current inflation is due to monetary policy.
- gizmo686 4y agoShelter tracks CPI less energy pretty closely, especially during the recent surge: https://fred.stlouisfed.org/graph/?g=RJqZ https://fred.stlouisfed.org/graph/?g=RJqZ
- adam_arthur 4y agoCore inflation, which excludes energy, rose at a 8.8% annualized rate. The current YoY figure is 5.9% So no, it's not just about gas. If you look at the numbers it's across the board and broad based. The Fed made a historic and pretty obviously needless mistake in delaying their response. Now we get to enjoy the fruits of either a severe recession or unchecked inflation if they decide to chicken out
- baobob 4y agoWhich elements of CPI aren't indirectly tied to the cost of energy?
- adam_arthur 4y agoRent, which is rising close to the fastest pace on record for the CPI. But depends how many leaps you want to take to justify its relation to energy Nothing in the breakout of the CPI data shows slowing in pretty much any category
- JumpCrisscross 4y ago> Rent, which is rising close to the fastest pace on record for the CPI I’m renovating a home. Shipping is higher, due to labor conditions as well as fuel costs. If I rent it out a few times a year, as I’m considering, I will price to make that back. I’m sure those with purely rental properties are similarly inclined.
- adam_arthur 4y agoYes, the economy is interconnected. I also decided to increase rent on my rentals cause the price of bread doubled and my daily sandwich got more expensive
- qwerpy 4y agoI never consider my own costs when choosing how to price a rental. I will always charge market rates. If market rates are higher than my costs, great. I won't lower my rates, I'll just pocket the extra money. Similarly if market rates are lower than my costs, I can't just stubbornly keep the rates high. No one will rent from me. If that goes on for a long time I'll decide it's a non-performing asset and sell it.
- danaris 4y agoBut bear in mind also that the price of gasoline is not directly tracking the price of oil: it's much more expensive now than it was a few years ago when oil was about the same price. A lot of the "inflation" we're experiencing right now is straight-up price gouging. There have been a number of reports of record profits amid all of this.
- CydeWeys 4y ago> But bear in mind also that the price of gasoline is not directly tracking the price of oil There's always been a substantial lag. Production/shipping always takes time, plus you've got the sticky price effect to contend with. The falling price of crude today will result in cheaper prices at the pump later this year, but not immediately.
- danaris 4y agoThat's likely true, too. I'm hopeful that we will, indeed, see some drop in the price of gas (though frankly, I'm also expecting to see prices rise again before winter...which is going to be rough in some places). But from what I understand, gas prices also rose much faster in proportion to the price of oil than they have in past oil price spikes. And while I haven't seen any numbers specifically for oil/gas companies, we've definitely been seeing record profits alongside the rising prices in various places these past few months. I can't claim that it's the whole of the current inflation, but there's definitely some opportunistic price gouging going on.
- balderdash 4y agoIf you’re talking about retail gas prices a lot of that is inventory driven. Think about it, if I buy a tanker truck of diesel that takes a week to sell @$3/gal and prices start to rise, sure I’ll rapidly match prices, but maybe be willing to be a bit cheap (since I make most of my money on the convenience store), but now fast forward 6 months and I buy a cargo @5.5 and prices start to drop, I’m going to be inclined to lower prices as slowly as I can try to limit at how much of a loss as I going to sell my fuel high cost basis fuel (where it becomes a little anti-consumer is I can probably rely on the station across the street to be in the bind, and so neither of us are in a rush to mark to market until we have newer lower cost basis inventory)
- titzer 4y ago> This has nothing to do with monetary policy. Monetary policy right now. It has everything to do with monetary policy for the past few years, which created trillions of new dollars.
- missedthecue 4y agoI wish people would stop acting like the world is fine aside from gasoline. Food at home is up 12% from a year ago - cereals and bakery products up 13.8% - Flour and prepared flour mixes up 19.2% - fruits and vegetables 8.1% - Canned vegetables 14.3% - Dairy and related products 13.5% - Fresh whole milk 17.1% - Meats, poultry, and fish 11.7% - Eggs 33.1% - Nonalcoholic beverages and beverage materials 11.9% - Roasted coffee 16.8% - Other Foods 14.4% - butter and margarine increasing 26.3 percent.
- ejolto 4y agoIt's not surprising that food prices rise when gasoline and natural gas prices rise. You need the gas for transporting and producing food, and you need natural gas for manufacturing fertilizer.
- roguas 4y agoAll this products require energy resources to produce. Energy resource prices are volatile thus everybody has to add safe margins. Not really a lot more to say - world is not fine, there is a war in northern parts which is rare. There are additional factors contributing to inflation (covid spending etc.)
- zinekeller 4y ago> I wish people would stop acting like the world is fine aside from gasoline. The reason why is there an (appropriate in my opinion) focus on gasoline and other crude-oil products is that other commodities and services relies on this commodity. We're not yet in a state where we can use other resources as substitute for it (either because green energy is not that scaled-up or because crude oil directly contains what is needed - for example fertilizers and plastics).
- Throwawayaerlei 4y agoPerhaps worth noting poultry and especially chicken eggs are subject to truly transitory inflation due to the current avian flu outbreak: https://en.wikipedia.org/wiki/2020%E2%80%932022_H5N8_outbreak https://en.wikipedia.org/wiki/2020%E2%80%932022_H5N8_outbrea... Have not checked up on it for a while, but in the US it hit laying hens much harder than any other poultry category. You are of course generally correct, food inflation for what I buy is roaring and significantly above topline CPI.
- mminer237 4y agoIt's still 6% inflation even if you take out food and energy: https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri... Obviously Russia is making it worse, but I think it's naïve and simplistic to say monetary policy has nothing to do with it. I would still argue monetary policy must comprise a slight majority of the blame.
- Arn_Thor 4y agoDon't forget very handsome and ever-rising corporate profits. They've been taking advantage of headlines to raise prices, reduce quality/quantity and cut expenses.
- worker_person 4y agoThis is nonsense. Unless there is a monopoly, companies have to offer the lowest / best deal or they go out of business quickly. Food and many other industries are extremely competitive and there is no wiggle room to just raise prices and laugh at poor people. If transportation is 50% of your products price (end to end); and fuel cost doubles, then you have to raise prices 50% just to break even.
- coding123 4y agoThis is true. Large plastic tanks, like 3-5k gallon ones for water storage doubled and potentially heading for tripling in prices because of this simple fact: You can only put like 3-5 on a truck that has to drive from very far away. It makes it so that if your state does not mold plastic, then you are directly paying for the fuel of that truck.
- hotpotamus 4y agoI'd say a cartel works about as well as a monopoly. I think you're right about food, but you can get vertical(? - I can never remember vertical or horizontal) integrations at some points like it seems we have with beef - lots of people can grow cows, but if a cartel gets control of the processing plants, they can squeeze the market at both ends.
- _blz2 4y agoIf you're right, next months CPI print should be 20-25% less because gas prices decreased by that amount. Willing to place a bet?