Often too hot or too cold, economic conditions are a work in progress for monetary minions. The desired Goldilocks just right scenario is tough to produce with the Federal dual mandate of low unemployment and modest inflation.
A two percent target has been impossible to achieve as global deflation has become more of a real concern. The race to the bottom in rates and currency valuations has combined with commodity demand growth declines to see prices slide.
A crude oil drop has extinguished embers trying to light the inflation fight. Food and energy prices have plummeted though not included in the most flowed Consumer and Producer Price Index measures.
Core CPI ticked up point three percent in January to jump the most in four years. The annual rate has increased to 2.2% supporting further rates reductions. Food and oil prices are eliminated in core because of price volatility.
I’ll even argue that the internet has led to a more competitive and transparent market for anything and everything, with just the click of a button.
Inflation is occurring in our nation when you look at the service sector. In reality, the US Economy is based on the consumer with a large percentage of the activity service based.
Tell parents of college aged children that there is no inflation and be prepared for a righteous rant. Health care costs have seen a slowing from double digit yearly increases to more modest growth. Rents are too damn high, to quote the viral video, with more demand with home ownership down.
And the everyday internet, phone, music, movies and television connectivity necessities don’t get any less expensive according to my personal anecdotal evidence.
Lastly, the desired inflation that most seek is increased wages. A previously static and stuck employee reward for production has seen the annualized rate increase to 2.5% in wage inflation.
Firming CPI and a strengthening labor market are signs that the fire is still smoldering but may produce some heat.
