After 11 months of QE, the economy is growing more consistently, and I believe that once the effect of the oil price decline drops out
of inflation figures next year, the annual rate of inflation could move slightly above 1 %.
To expect the Fed to hold rates at current levels or just a quarter - point higher, in the face
of those inflation figures, would seem to be asking a lot.
Both gold and silver have risen in the wake
of the inflation figure, and at the time of writing gold is holding steady at $ 1353.60 USD / oz in early London trade.
Not exact matches
Euro zone officials received a slew
of good news on Tuesday morning with stronger - than - expected growth and
inflation figures and a falling unemployment rate.
British government
figures showed
inflation rising at a rate
of 3 percent in October — unchanged from the previous month.
That's bad compared with the U.S. and the European Union, where the rates
of inflation are 2.7 percent and 3.1 percent, respectively, but economists not affiliated with the government say the real
figure is at least twice as high.
For example, while the Bank
of Canada uses core
inflation to set its monetary policy, that
figure does not include the cost
of fuel and food, which nonetheless represent a significant chunk
of many household budgets.
Polish
inflation figures which often predict trends in the rest
of the region, showed a pick - up in the annual rate to 1.6 percent in April from 1.3 percent a month earlier, largely in line with expectations.
The March
figure shows the pace
of inflation inched a little farther past the midpoint
of the central bank's ideal range
of between one and three per cent.
Although the patches prevented an AMT explosion, the number
of taxpayers affected by the AMT continued to grow throughout the decade (
figure 1) because (1) the regular income tax was indexed for
inflation, but the AMT was not; and (2) Congress enacted substantial cuts to the regular income tax.
The size
of this decline overstates the real extent
of the slowing in prices, just as the peak
figure overstated the real extent
of inflation.
These considerations
figured prominently in the Governing Council's deliberations, because the state
of total demand in the economy relative to our production capacity is what drives our
inflation outlook.
Figure 1 shows estimates
of the
inflation - adjusted natural rate for four major economies: the United States, Canada, the euro area, and the United Kingdom (Holston, Laubach, and Williams 2016).
The
figure includes the unemployment rate, the Fed's estimate
of the «natural rate» — the lowest unemployment rate they believe to be consistent with stable
inflation at the 2 % target — year - over-year wage and price growth (using the core - PCE deflator, the Fed's preferred
inflation benchmark right now).
For the GDP data, the
figures are up to the March quarter
of 2016 while those for
inflation and the unemployment rate are up to the June quarter, so the annual averages are computed by expressing 38 or 39 quarters at an annual rate.
In the latest year,
inflation in underlying terms has been close to 2 1/2 per cent, though the headline CPI
figure is higher, principally reflecting the effect
of rising fuel prices.
We had already put in place a response in advance
of the expected pick - up in
inflation and it is not necessarily always wise to respond to one high (or low)
figure.
The
figure below shows some
of the key indicators from the Fed's dashboard, including unemployment, the Fed's guess at the «natural rate» (the lowest unemployment rate consistent with stable
inflation), actual
inflation (PCE core, the Fed's preferred gauge), and the Fed's
inflation target
of 2 percent.
The
figure below shows two series
of market - derived
inflation expectations, both
of which turn up pretty sharply towards the end (before the election, but the daily measures show a spike afterwards).
However, as the
figure below shows, while unemployment is clearly below the Fed's full - employment - unemployment rate
of 4.7 percent, core
inflation has been going the «wrong» way, i.e., slowing, not speeding up (see its down - tick at the end
of the
figure).
Treasury bond prices rallied and yields on the 10 - year fell to between 2.8 % and 2.85 % following the release
of benign
inflation data and weaker - than - expected retail sales
figures.
Note the recent slowing
of the aggregate real wage measure at the end
of Figure 3, largely a function
of faster
inflation growth (the energy effect noted above) and some slowing
of job and (blue - collar) wage growth.
The
figure shows that in the first quarter
of 2017, forecasters expected that 2018 CPI would be running at 2.3 percent, consistent with the Fed's 2 percent
inflation target using the PCE measure
of inflation.
Following his comments, with the prospect
of a rise in eurozone interest rates apparently pushed back to 2018 at the earliest, the euro — which had already dipped in the wake
of the lower - than - expected
inflation figures — gave up more ground.
If one uses real rates
of inflation produced by Shadowstats (versus the fantasy land
figures of low
inflation quoted by the Bureau
of Labor Statistics every month for years on end), one can prove that the US dollar has crashed.
Consumers have increased spending, perhaps in anticipation
of price
inflation (consumer prices stopped declining in May), which Kuroda believes is on track to a 2 % growth
figure in 2 years.
In spite
of lingering concerns about Greece's fate, the European economy would appear to have hit a sweet spot marked by steadily improving growth and
inflation figures, along with declining unemployment.
Hurricane Katrina, in 2005, caused $ 160 billion in damage, and the remnants
of Hurricane Sandy in 2012 caused about $ 70 billion in damage, according to
inflation - adjusted
figures provided by the federal government.
House prices in 31
of the 41 world's housing markets, which have so far published statistics, rose during 2014, using
inflation - adjusted
figures, the 2014 Global Property Guide...
For the EUR, economic data scheduled for release this morning includes retail sales
figures out
of German, together with prelim April
inflation numbers out
of Germany and Italy.
The Aussie Dollar moved from $ 0.75781 to $ 0.75706 upon release
of the
figures, as focus now shifts to the RBA's interest rate decision and release
of the rate statement tomorrow, disappointing
inflation figures for the 1st quarter likely to leave the RBA in a holding pattern for the foreseeable future.
CPI
inflation in year - ended terms should stay in a narrow range around this profile over much
of the forecast horizon, though volatility in oil and food prices over the past year will continue to have some effect on the year - ended
figures in future quarters.
Not only were the second - quarter GDP
figures somewhat disappointing, but
inflation has remained quite low even though the eurozone pulled its way out
of a short period
of deflation seen at the beginning
of this year.
Figures already released for December showed a renewed drop in
inflation in two
of the world's largest economies, with the euro zone recording a decline to 0.8 % from 0.9 %, and China recording a fall to 2.5 % from 3.0 %.
China's private sector PMI
figures supported market risk appetite through the Asian session, while expectations
of a dovish RBA weighed on the Aussie Dollar ahead
of this afternoon's
inflation figures out
of the U.S that could see another bounce in the Dollar
It involves looking at what is happening in the news, such as an announcement by a company, an industry announcement, and the release
of government
inflation figures.
The U.S. Census Bureau will release its
inflation - adjusted retail sales
figures for the month
of May tomorrow at 8:30 a.m. ET.
 However, Statistics Canadaâ $ ™ s
figures from actual payroll data show that average wages paid by local governments have increased at a lower rate than overall average wages and at rates above the rate
of inflation over the past twenty years:
Todayâ $ ™ s
inflation figures beg the question
of whether that will even cover
inflation plus population growth.
Given this path for underlying
inflation, CPI
inflation is expected to dip temporarily below 2 per cent in early 2004 as the large March 2003 CPI
figure drops out
of the year - ended calculation.
The comparable
figure for headline
inflation moved up from 1.5 % to 1.9 %, bringing it back up to the ECB's target
of slightly below 2 %.
The Reserve Bank
of India cut its main repurchase rate by 0.25 percentage point to 7.5 %, citing weakness in parts
of the economy as well as favorable
inflation figures and structural overhauls included in the government's proposed budget.
For the following year, underlying
inflation of 2.6 per cent is expected, with a similar
figure for the headline rate as mortgage interest reductions drop out
of the calculation.
Wage increases under enterprise bargaining continue to be in the 4 to 5 per cent range,
figures which appear high in a climate
of 2 per cent
inflation and 8 1/2 per cent unemployment.
Economic data released through the Asian session was on the heavier side this morning, with stats including New Zealand's trade
figures for March,
inflation, industrial production and retail sales
figures out
of Japan and wholesale price
inflation numbers out
of Australia.
We will expect the
figures to have an influence on the EUR, with any hint
of a pickup in
inflation and stable economic growth through the 1st quarter the best outcome for the EUR and those looking for Draghi to begin shifting on policy towards interest rates.
For the EUR, economic data scheduled for release this morning is on the heavier side and includes
inflation and GDP numbers out
of France and Spain, unemployment numbers out
of Germany and French consumer spending
figures.
Nevertheless, in light
of the latest sluggish
inflation figures and dovish comments by a number
of Fed officials, there was increased skepticism among many market participants about whether policymakers would go ahead and implement another rise in interest rates before the end
of the year, as indicated by the Fed's projections for monetary policy.
One
of the major problems for an investor looking at that 10 % average return
figure and mistakenly expecting to realize a nice yearly profit from investing in the S&P 500 is
inflation.
These
figures simply show how Australian consumers are being punished by the grocery duopoly with some
of the highest rates
of food
inflation in the developed world.