Tag Archives: Consumer Price Index

Nasdaq plummeted more than 5%

What a day in the stock market. Nasdaq plummeted 5,16%. That`s 632,84 points. Dow Jones and S&P 500 were also sharply down, followed by cryptos like Bitcoin. They all went down because the annual inflation rate in the US eased for a second straight month to 8,3% in August of 2022.

This is the lowest number in four months, so why did investors have so much panic? The rate is down from 8,5% in July. But it`s down from 9,1% in June, so, it’s on the way down. For all I know, it will continue the same path, and probably end up in the opposite direction; deflation in the long run.

The energy index increased by 23,8% (32,9% in July). Gasoline increased 25,6% (44% in July). Fuel oil increased 68,8% (75,9% in July).

Photo by Wendy Wei on Pexels.com

Natural gas increased 33% vs 30,5%, and electricity was at the highest since August 1981, at 15,8%. Prices for food rose by 11,4%, and that is the most since 1979. The shelter is up 6,2%, which is the most since 1984.

CPI, which excludes volatile energy and food prices, increased 6,3% in a year. This is the most since March, and up markedly from 5,9% in June and July.

The Federal Reserve has done a lot to push down inflation because inflation over time could have dramatic consequences for consumers. The Fed has been hawkish when it comes to interest rate hikes this year.

They try to make it expensive for consumers to borrow, and the interest rate hikes will affect consumers’ interest rates like credit cards, loans, and mortgage rates.

CPI measures changes in the cost of consumer goods and is a key indicator of just how bad inflation is.

Economists anticipated a lower CPI in August, but the index rose 0,1% from the previous month and 8,3 on an annual basis. More rate hikes from the Fed will force consumers to change their lifestyles in the future.

The Fed looks at CPI when deciding whether to raise rates or not. Experts claim that we must expect the Fed to continue to be very aggressive when it comes to rate hikes. So, fasten your seat belts.

So far this year, the central bank has already raised rates by 225 basis points, and many investors are waiting for another 75 basis point rate hike at their meeting next week.

The cost of living is increasing. Higher electricity bills, food, gasoline, and gas prices are making it difficult for many, and it isn`t easy to borrow either. The cost of borrowing is also increasing. On the other side; the rate on your saving account is also increasing.

Experts predict that we could see many more months of rampant inflation.

The Fed funds futures are pricing in a 36% chance that the bank will raise its benchmark rate by a full percentage point. Nomura forecasted a 100 basis point hike in September.

Investors don`t like Fed`s hawkishness, and they are worried that the Fed`s inflation fight will bring in a recession. On the other hand; the Fed is also ramping up the unwinding of its balance sheet to $95 billion per month.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shinybull.com. The author has made every effort to ensure the accuracy of the information provided; however, neither Shinybull.com nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities, or other financial instruments. Shinybull.com and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Inflation and Gold

Investors buy gold because they think that gold is a hedge against inflation. The value of the paper currency falls in terms of the goods and services that it can buy and inflation goes in the opposite direction; up.

Investors love gold when inflation is high and as you may know, gold has a direct relationship with inflation. So when inflation goes up so does the demand for gold. Imminent hyper inflation was expected during the QE program, but that is not the reality right now.

You can track inflation using the Consumer Price Index (CPI). This index measures how the price of a basket of consumer goods and services changes. CPI will give you a picture of the increase in the level of prices.

us cpi

This data is released by the U.S Bureau of Labor statistics on a monthly basis. U.S inflation rate is -0,09%, (released Feb 26, 2015), compared to 0,76% in December and 1,58% last year. This is lower than the long-term average of 3,32%. Down -111,8%.

Inflation fell in January for a third straight month as U.S consumers continued to spend less on gas, food prices flattened and as costs retreated for new vehicles,used cars and trucks, household furnishings and operations, airline fares, alcohol and tobacco. U.S inflation turned negative for the first time since 2009.

The CPI measures what American pays for everything from cloths, airline tickets, fruits and vegetables to cars. Declines were again led by energy as prices at the pump tumbled about 19%. Gasoline prices have plunged 35% over the past 12 months.

A slower pace of inflation means consumers can buy more with their money, but a sustained decline over and extended period (deflation), can wreak havoc on an economy. Falling energy prices are beginning to filter down into other areas.

Core US inflation advanced 1,6% over the last 12 months, and the core 12-month reading is the benchmark inflation figure monitored by the Federal Open Market Committee (FOMC) as it helps in deciding where to set the key interests rate.

«We think inflation is going to move lower before it moves higher. Declining oil prices have had a very major influence,» Fed Chairwoman Janet Yellen said in a testimony.

The current level remains below the Fed`s 2% annual inflation target. In written remarks read to Congress, Janet Yellen stated:

“The Committee expects inflation to decline further in the near term before rising gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate, but we will continue to monitor inflation developments closely.”

Consumer Price Index data for February inflation and the annual period is scheduled for release on March 24, 2015.

 


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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Filed under Commodities, Politics, Quantitative Easing