Can The Fed Control Inflation With Just Rate Hikes? – OpEd


There is not much good news in the latest report on the Consumer Price Index. Supply chain items, like new vehicles and furniture, still report rising prices. Rents continue to rise rapidly. There is some turn around with used cars, appliances, and apparel, but not enough to offset the bad news elsewhere.

Reports from retailers indicate we should see more areas with price declines this fall, but we have been waiting on this for a while.

Maybe the Fed can not control this stuff in this current world the way they think, or used to think, without killing the patient. It is their only tool in the multi-factored toolbox.

+ Big jumps in new car and shelter prices (0.7 percent) pushed the overall CPI up 0.4 percent in September; the core CPI rose 0.6 percent.

+ The September rise put new vehicle prices up 9.4 year-over-year; although used vehicle prices fell 1.1 percent, they were still up 7.2 percent year-over-year.

+ Car insurance went up 1.6 percent in September, 10.3 percent year-over-year.

+ Motor vehicle parts and equipment were up 0.8 percent in September, 13.4 percent year-over-year. This is also a supply chain item with production back to its pre-pandemic levels.

+ Both rent indexes rose 0.8 percent in September. Rent proper went up 7.2 percent year-over-year, and owners’ equivalent rent went up 6.7 percent year-over-year. Bureau of Labor Statistics research shows these indexes trail indexes of market rents, which now show much lower rates of increases.

+ Rent in high priced cities lags overall in rental increases: NYC was up 3.0 percent year-over-year, SF was up 2.3 percent, and Phoenix was up 20.8 percent.

+ Food at home prices went up another 0.7 percent (the same as in August); went up 13.0 percent year-over-year. Beef prices were down 0.1 percent, but were up 20.3 percent since the start of the pandemic.

+ Medical care services rose 1.0 percent, up 6.5 percent year-over-year. A big factor is the 2.1 percent rise in the health insurance index, which was up 28.2 percent year-over-year. This index measures profits and administrative costs, not premiums.

+ Household furnishing and supplies (a supply chain item) rose in price 0.6 percent in September, up 9.9 percent year-over-year. Furniture and bedding prices, which had been flat or falling before the pandemic, are up 22.9 percent since February 2020.

+ The 0.3 percent decline in appliance prices is the third consecutive decline. However, prices were still up 13.3 percent from the pre-pandemic level. They had been falling before the pandemic.

+ Apparel prices fell 0.3 percent, up 5.5 percent year-over-year.

+ College tuition fell 0.3 percent, up 2.1 percent year-over-year. College tuition costs were up just 3.7 percent since the start of the pandemic.

This first appeared on Dean Baker’s Beat the Press blog. 

Dean Baker

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

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