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    Here's Why Inflation Is Worrying Washington

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    Price gains have moved up sharply for months, but the fact that the trend is lasting and broadening has newly put policymakers on red alert.Aquan Brunson, 45 and from Brooklyn, used to buy three slices of cheese pizza from 99 Cents Pizza of Utica for lunch each day. But about three months ago, inflation ate away that third slice. The shop has pasted over its old sign to alert customers that it is now “$1.50 Hot Pizza.”“The dollar doesn’t take us far,” said Mr. Brunson, patting his greasy lunch down with paper napkins on a gray December afternoon. “The cost of everything is going up.”Consumers across the country can tell you that inflation has been high this year, evidenced by more expensive used cars, pricier furniture and the ongoing demise of New York City’s famous dollar slice. But until recently, policymakers in Washington responded to it with a common refrain: Rapid price increases were likely to be transitory.Last week, policymakers said it was time to retire the label “transitory,” and acknowledged that the price increases have been proving more persistent than expected.Jerome H. Powell, the Fed chair, said that while his basic expectation is that price gains will cool off, there’s a growing threat that they won’t do so soon or sufficiently.“I think the risk of higher inflation has increased,” he said.A fresh report set for release on Friday is expected to reinforce that concern. The Consumer Price Index could show that inflation picked up by 6.8 percent over the past year, the fastest pace in nearly 40 years. More worrisome for the Fed is that inflation is broadening to many products and services, not just those directly affected by the supply chain woes that have driven up prices for cars and electronics.Here is a rundown about what to know about the price pops sweeping America and the world — and what to expect when new U.S. consumer price inflation figures are released on Friday.Inflation measures price increases.When economists and policymakers talk about “inflation,” they typically mean the increase in prices for the things that people buy out of pocket — tracked by the Consumer Price Index, or C.P.I. — or the change in the cost of things that people consume either out of pocket or through government payments and insurance, which is tracked by the less-timely Personal Consumption Expenditures index.Both measures are way up this year, and C.P.I. data set for release on Friday is expected to show that inflation picked up by the most since 1982. Back then, Paul Volcker was the Fed chair, and he was waging a war on years of rapid price gains by pushing interest rates to double digits to cripple business and consumer demand and cool off the economy. Today, interest rates are set at near-zero after policymakers slashed borrowing costs at the beginning of the pandemic.Price gains are becoming broader.There are plenty of differences between 1982 and today. Inflation had been low for years leading up to 2021, and pandemic-era lockdowns and the subsequent reopening are behind much of the current price pop.Consumer demand surged just as rolling factory shutdowns and a reshuffle in spending to goods from services caused manufacturing backlogs and overwhelmed ports. That’s why policymakers were comfortable dismissing high inflation for a while: It came from kinks that seemed likely to eventually work themselves out.But price gains are increasingly coming from sectors with a less clear-cut, obviously temporary pandemic tieback. Rents, which make up a big chunk of inflation, are rising at a solid clip.“Housing — that is the key broadening,” said Laura Rosner, an economist at MacroPolicy Perspectives.The potential for wider and more lasting price pressures have put Fed officials on edge. Policymakers at the central bank, who had been slowly tiptoeing away from supporting the economy, broadcast clearly last week that they are preparing to speed up the retreat.“They know this report is coming,” Ms. Rosner said of Friday’s anticipated number. “It’s going to confirm and explain why we’ve seen such a sharp shift.”Supply chain snarls are lasting.Abdul Batin, owner of 99 Cents Pizza of Utica, plans to rebrand his Brooklyn pizza store as “$1.50 Pizza of Utica.”Jeanna Smialek/The New York TimesDisruptions to the global flow of goods are not fading as quickly as policymakers had hoped. Additional virus waves have kept factories from running at full speed in Asia and elsewhere. Shipping routes are clogged, and consumers are still buying goods at a robust pace, adding to backlogs and making it hard for the situation to normalize.Households have some $2.5 trillion in excess savings, thanks in part to pandemic-era stimulus, which could help to keep them buying home gym equipment and new coffee tables well into next year.“The earliest we see things normalizing is really the end of 2022,” said Phil Levy, chief economist at the logistics firm FlexPort. When it comes to misunderstanding inflation, he said, “part of the problem is that we treated the supply chain like it was a special category, like food or energy.”But as 2021 has made inescapably clear, the global economy is a delicately balanced system. Take the car industry: Virus-spurred semiconductor factory shutdowns in Taiwan delayed new car production. Given the dearth of new autos, rental car companies had to compete with consumers for previously owned vehicles, leaving shortages on used car lots. The chain reaction pushed prices higher at every link along the way.Global snarls have also helped to push up food prices, as Abdul Batin, owner of 99 Cents Pizza of Utica, can attest. He plans to rebrand it as “$1.50 Pizza of Utica,” and explains that while some customers balked at the cost increase, he couldn’t help it.“Everything is going up right now — cheese, flour, even the soda price,” he said.Wages are also rising.A grocery store in Queens, N.Y. Global snarls have also helped to push up food prices.George Etheredge for The New York TimesAnother thing that could keep inflation high? Wages are climbing swiftly, and some companies have begun to talk about passing those rising expenses onto customers, who seem willing and able to pay more. The Employment Cost Index, a measure the Fed watches closely, picked up notably in the three-month period that ended in September.The risk is that this is an early, and still dim, echo of the kind of wage-and-price dynamic that helped to fuel higher prices in the 1970s and 1980s. Back then, unions were a much more powerful force, and they helped to make sure pay kept up with rising prices. Inflation and wage gains pushed each other into an upward spiral, to the point that price increases leapt out of control and demanded a Fed response.In the years since, workers have typically had less formalized bargaining power. But employers are contending with labor shortages as the virus keeps many would-be employees on the sidelines and as demand booms. That is giving workers the ability to command higher pay as they face climbing costs themselves, and it is prompting many employers to lift wages to compete for scarce talent. That could keep demand solid by bolstering peoples’ wherewithal to spend.“Looking ahead, businesses across all major sectors foresee continued widespread wage hikes,” the New York Fed reported in its section of the Fed’s Beige Book, an anecdotal survey of business and labor contacts carried out by regional Fed banks.In Atlanta’s region, the Beige Book noted, “several contacts mentioned that labor costs were already being passed along to consumers with little resistance, while others said plans were underway to do so.”Mr. Brunson — the pizza aficionado — works at a grocery store. They’ve raised his pay, he said, but it is not enough to keep up with climbing cost of food and other expenses.“They gave us an extra dollar, but that’s just to offset the inflation,” he said. He and his family, three adult children who live with him, are coping by cutting back. “No eating out, less food, less meat.” More

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    Millennials Confront High Inflation for the First Time

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    Year-over-year change in Consumer Price Index 2020 2010 2000 1990 1980 1970 1960 -5 0 +5 +10 +15% Boomers Gen X Millennials Gen Z Source: Labor Department·Note: Age ranges show when each generation began to turn 18. Data is not seasonally adjusted. Millennials have spent much of their lives enduring economic calamity. Many were children […] More

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    The Inflation Miscalculation Complicating Biden’s Agenda

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    Administration officials blame the Delta variant for a prolonged stretch of consumer spending on goods, rather than services, pushing up prices and creating a conundrum for the Fed.WASHINGTON — President Biden’s top economists have worried from the beginning of his administration that rising inflation could hamstring the economy’s recovery from recession, along with his presidency. Last spring, Mr. Biden’s advisers made a forecasting error that helped turn their fears into reality, a calculation that spread to this week’s decision to renominate the Federal Reserve chair.Administration officials overestimated how quickly Americans would start spending money in restaurants and theme parks, and they underestimated how many people wanted to order new cars and couches.Mr. Biden’s advisers, along with economists and some scientists, believed that widespread availability of coronavirus vaccinations would speed the return to prepandemic life, one in which people dined out and filled hotel rooms for conferences, weddings and other in-person events.Instead, the emergence of the Delta variant of the virus over the summer and fall slowed that return to normalcy. Americans stayed at home, where they continued to buy goods online, straining global supply chains and sending the price of almost everything in the economy skyward.“Because of the strength of our economic recovery, American families have been able to buy more products,” Mr. Biden said this month at the Port of Baltimore. “And — but guess what? They’re not going out to dinner and lunch and going to the local bars because of Covid. So what are they doing? They’re staying home, they’re ordering online, and they’re buying product.”That view is the closest thing the administration has offered to an explanation for why the White House was surprised by the size and durability of a price surge that has hurt Mr. Biden’s poll numbers and imperiled part of his economic agenda in Congress. From the administration’s perspective, the problem is not that there is too much money sloshing around, as Republicans and some economists insist, but that consumers are throwing an unexpectedly large amount of that money at a narrow set of things to buy.Put another way: If Mr. Biden had sent people travel vouchers or DoorDash gift cards for services — instead of sending Americans direct payments as part of his $1.9 trillion rescue plan in March — the inflation picture might look different right now..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}Inflation has risen across wealthy nations over the past year, but it has risen faster in the United States, where prices rose 6.2 percent in October from the year before. America’s inflation has been exacerbated, in part, by Mr. Biden and his predecessor, Donald J. Trump, pouring more fiscal support into the U.S. economy than their counterparts did elsewhere, at a time when consumption patterns shifted and did not rapidly snap back to normal.Republicans, and even some left-leaning economists such as the former Obama administration officials Lawrence H. Summers and Jason Furman, have blamed the rapid price increases across the economy on the aid package that Mr. Biden signed in the spring. They say the package’s direct assistance to Americans, including $1,400 checks to individuals and enhanced benefits for the unemployed, fueled more consumer demand than the economy could bear, driving prices skyward.Mr. Biden is betting that those critiques are largely wrong — and that the Fed would be wrong to follow their advice. His aides say excess consumer demand is not the driver of the fastest price increases America has seen in decades, and that the economy needs more fuel, not less, to complete the job of delivering wage and employment gains to historically marginalized workers.The president wants Fed Chairman Jerome H. Powell, whom he reappointed this week for a second term, to join him in that wager — by avoiding quick increases in interest rates that could choke off growth, and which would not address what White House officials see as the real cause of inflation: the virus.“We’re still dealing with the difficult challenges and complications caused by Covid-19 that are driving up costs for American families,” Mr. Biden said on Monday at the White House, in announcing Mr. Powell’s reappointment and laying the blame for inflation at the feet of the resurgent virus.A cafe that closed this summer in Washington. The resilience of the coronavirus slowed Americans’ return to spending on in-person services like dining and tourism.Alyssa Schukar for The New York TimesWhile prices are up broadly across industries and sectors of the economy, there is a wide gulf in the inflation rates of physical things people buy and the services they consume. The Consumer Price Index for services is up 3.6 percent from the previous year. For durable goods, it is up 13.2 percent. And those goods represent a much larger share of America’s consumer spending than they did before Covid-19 hit.On the eve of the pandemic, about 31 percent of American consumer spending went toward goods, and the rest toward services. In September, that share had risen to about 35 percent, down just slightly from its pandemic highs. Those few percentage points made a huge difference for supply chains, which were suddenly carrying record-shattering levels of toys, electronics and other goods from country to country, and straining under the load.The $1.9 trillion rescue plan “juiced demand, and importantly for the inflation story, much of that demand played out in reduced consumption of in-person services and increased demand for manufactured goods,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in a speech this week.“That, in tandem with the impact of the virus on transportation logistics, has played a role in elevated price growth.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    U.K. Inflation Hits a 10-Year High

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    Inflation in Britain rose to its highest level in nearly a decade in October after soaring energy prices hit household bills.The Consumer Price Index rose to 4.2 percent from a year earlier, the highest since November 2011, and up from 3.1 percent in September, the Office for National Statistics said on Wednesday. The price increases were more than twice the central bank’s target of 2 percent, increasing the likelihood that policymakers will go ahead with the interest rate increases they have signaled are coming.The biggest contributor to higher inflation was a surge in energy costs, including wholesale natural gas, which has caused nearly two dozen energy suppliers in Britain to collapse and disrupted manufacturers. The cap on energy bills, which protects about 15 million households, was raised 12 percent sharply in October.Other large contributors were higher prices for gasoline and at hotels and restaurants, the statistics agency said.The Bank of England has said it expects inflation to peak at about 5 percent in the spring. “This period of higher inflation is likely to be temporary,” Andrew Bailey, the central bank’s governor, said this month. But there was “no fixed unit of time” that defines transitory, he said.The central bank said that “it would be necessary over coming months” to raise interest rates if the economic data played out as policymakers anticipate, especially if the end of the government’s furlough program doesn’t result in a large increase in unemployment. In the three months through September, the unemployment rate was 4.3 percent, 0.2 of a percentage point lower than in the three months through July, and early payroll data indicated that only a small number of people lost their jobs in October when the furlough program expired.As the global economy emerged from successive lockdowns over the past year, supply bottlenecks, labor market shortages and other shortages have disrupted supply chains around the world. Policymakers are now warning that the supply problems and the higher prices that result will last longer than they initially expected, adding pressure on central bankers to act more aggressively to stop inflation from getting out of their control.In the United States, the Consumer Price Index jumped to 6.2 percent in October, the fastest annual increase since 1990, and prices rose 4.1 percent in the eurozone last month, the fastest in 13 years. In China, the prices wholesalers pay to producers climbed to the highest in 26 years amid rising commodity prices and power shortages. More

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    Rising Rents Stoke Inflation Data, a Concern for Washington

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    Economic policymakers have said inflation will prove temporary, but rising rents may challenge that view and pressure Washington to react.Terrell McCallum, a private wealth adviser in Dallas, spends a lot of time thinking about markets and interest rates. He knows that the Federal Reserve targets 2 percent annual price increases on average, so it was a shock when he learned that his rent would increase a whopping 10 percent this year.“I can afford it, but it gets to the brink of financial burden,” said Mr. McCallum, 33. He and his wife have been saving up for their first home, but now that they are paying $1,830 for their apartment and fees, that will become more difficult. He tried to push back on the increase, but the company he rents from wouldn’t budge.“They said: ‘This is what the market is doing.’”Mr. McCallum’s experience is echoing across America, as rents shoot higher after a brief pandemic slump, burdening households and fueling overall inflation. That is bad news for the Federal Reserve, because it could make today’s uncomfortably rapid price gains last longer. It’s also problematic for the White House because it hits households right in their pocketbooks, diminishing well-being and fueling unhappiness among voters.The jump in rents stemmed from a frenzy in the market for owned homes. People tried to buy as the pandemic took hold in the United States, often searching for extra space, but found that houses were in short supply after years of under-building following the housing crisis. That dearth of properties has been exacerbated by work stoppages, supply shortages and labor constraints during the coronavirus era, all of which have kept developers from ramping up production to meet demand.As buyers bid up prices on single-family homes and condominiums, many people who would have otherwise moved toward homeownership found themselves unable to afford it, increasing demand for apartments and home leases. Rents have been further boosted by the large number of people searching for places with more space and home offices during the pandemic, and as millennials in their late 20s and early to mid-30s look for more autonomy.“People might be looking to move out and on their own after being stuck with roommates during the pandemic,” said Adam Ozimek, the chief economist at Upwork, an online freelancing marketplace. “There’s also a possibility that remote work is playing a role here.”Government stimulus checks and expanded unemployment benefits also helped people amass savings over the course of the pandemic, so they can afford to move. Personal savings as a share of disposable income popped during the crisis, and while the share has come down toward normal levels, it remains slightly elevated at 9.4 percent, compared with about 8 percent just before the pandemic.The combination of factors seems to have created a perfect storm that pushed the Consumer Price Index measure of rent up 0.5 percent just between August and September, the fastest pace in about 20 years.That’s a concern for the Fed, because housing prices tend to move slowly and once they go up, they tend to stay up for a while. Rent data also feed into what is called “owners’ equivalent rent” — which tries to put a price on how much owners would pay for housing if they hadn’t bought a home. Together, housing measures make up about a third of the overall Consumer Price Index.Overall consumer prices have jumped sharply in 2021, climbing 5.4 percent in September from the prior year. Fed officials have been hoping and betting that the move is temporary, but they are watching housing measures carefully as a risk to that outlook.“Many participants pointed out that the owners’ equivalent rent component of price indexes should be monitored carefully, as rising home prices could lead to upward pressure on rents,” minutes from the Fed’s September meeting, released Wednesday, said.Rent is less critical to the Fed’s preferred inflation gauge, the one it officially targets when it shoots for 2 percent annual inflation on average, than it is to the C.P.I. But it is a big part of people’s experience with prices, so it could help shape their expectations about future cost increases.Those expectations matter a lot to the Fed. If consumers come to anticipate faster inflation, they may begin to demand higher wages to cover their rising expenses. As businesses lift prices to cover rising costs, they could set off an upward spiral. Already, some key measures of inflation outlooks — notably the New York Fed’s Survey of Consumer Expectations — have jumped higher.The Fed is already preparing to start slowing the large bond purchases it has been making during the pandemic to keep longer-term interest rates low and money flowing around the economy. If inflation stays high, the Fed may also come under pressure to raise its policy interest rate, its more traditional and more powerful tool. That might slow mortgage lending, cool the housing market and weigh down inflation.An apartment building in New York. The national median rent increased by 16.4 percent since January.Karsten Moran for The New York TimesBut doing that would come at a big cost, slowing the labor market when there are 5 million fewer jobs than before the pandemic. So for now, Fed officials are getting themselves into a position where they can be nimble without signaling that they’re poised to raised rates.White House officials are also wrestling with their options for easing housing price pressures. President Biden’s economic agenda includes measures that would build more houses and discourage zoning rules that keep new construction at bay.Such an intervention would take time — homes are not built overnight. And in the meantime, rents will almost certainly continue moving in the inflation data, which reflect rising housing costs at a long delay. More up-to-date measures of rental pricing pressure produced by Apartment List and Zillow have shown costs climbing in recent months, though many measures of rent and new leases have calmed down somewhat after a red-hot summer.The national median rent has increased 16.4 percent since January, Apartment List said in its September rental report, with monthly growth slowing slightly from its July peak.“This is still very strong by historical standards — we’re in off season,” said Igor Popov, chief economist at Apartment List. “It’s a racecar slowing down ahead of a turn, but it’s still going faster than we ever have in our lives.”Whether rent growth speeds up or slows next year may hinge on whether the government support that has given households the financial ability to afford housing gives way to a strong job market.“There’s room to run, for sure,” based on demographics alone, Mr. Ozimek said. “The question is whether the economy is going to go into full employment, or whether there’s a slowdown.”Rents could heat up as big cities including New York and Los Angeles rebound from the pandemic, said Daryl Fairweather, chief economist of Redfin. While smaller cities’ rental markets have been hot for months, the median rent in Manhattan climbed for the first time since the start of the pandemic in September, data from Miller Samuel and Douglas Elliman showed.The recovery in the New York area as a whole has been uneven as some families have moved to the city, bidding up prices, while others are struggling to pay, said Jay Martin, executive director of the Community Housing Improvement Program, which represents landlords of mostly rent-stabilized housing.“You have bidding wars for one unit, and then a renter who can’t pay,” he said. “A tale of two cities is happening within the same building.”Drew Hamrick, the senior vice president of the Colorado Apartment Association, a landlord group, said the rise in rents is not driven by landlords but by market factors.“Landlords don’t really set the price, consumers set the price,” he said. “It’s musical chairs.”Even if there is a pullback in rents next year, today’s suddenly higher housing costs could make for a painful adjustment period. Higher rent costs can reverberate through people’s lives and force tough decisions.Luke Martinez, a 27-year-old in Greenville, a town in East Texas, is contemplating buying a trailer and setting his family up on an R.V. lot after learning that he is losing the three-bedroom house he has been renting for about $1,000 per month since 2016.“It’s insane the amount of rent, even in this little Podunk town,” Mr. Martinez said.He’s looking at paying up to $1,500 per month for a new place, which will be tough. After getting laid off at the start of the pandemic, he had been living partly on savings — padded by an insurance payout after his car was stolen and totaled. He returned to working in automotive repair only this week. His wife had been working the front desk at a hotel until two months ago, but she is now home-schooling their 8-year-old.If they end up renting at the higher price, they will most likely afford it by forgoing a new car.“It’s pretty much just scraping by,” he said of his lifestyle. More

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    Fed Minutes September 2021: Officials Worried About Supply Chains

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    Federal Reserve officials were preparing to begin slowing down monetary policy support as soon as the middle of November, minutes from their September meeting showed, and policymakers debated when they might need to raise rates amid rising inflation risks.The Fed has been buying $120 billion in bonds each month and holding the federal funds rate near zero to make borrowing cheap and keep money flowing through the economy, stoking demand and speeding up the recovery. But the central bank’s officials signaled after their Sept. 21-22 meeting that they might announce a plan to pare back those asset purchases as soon as early November. Minutes from the gathering, released Wednesday, provided additional details on that plan.The minutes suggested that “if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.”The process could end by the middle of next year, the minutes indicated. That backed up the timeline that Jerome H. Powell, the Fed chair, laid out during his news conference after the meeting.At the same time, Fed officials have been clear that they will continue to support the economy with low interest rates as the job market continues to heal. Their hopes of moving very gradually when it comes to rate increases could be complicated by rapidly rising prices, though, as supply chain disruptions tied to the pandemic persist and rising rents raise the prospect of sustained increases.The minutes showed that “various” meeting participants thought that rates should stay at or near zero for a couple of years, warning that long-run trends that had dragged inflation down before the pandemic would again come to dominate. But “in contrast, a number” of Fed officials said that rates would need to increase next year, and that “some of these participants saw inflation as likely to remain elevated in 2022 with risks to the upside.”The committee as a whole fretted about supply chain disruptions, which have been pushing inflation higher and curbing growth. They discussed several bottlenecks, including in the housing industry.“Participants noted that residential construction had been restrained by shortages of materials and other inputs and that home sales had been held back by limited supplies of available homes,” the minutes showed. Later, they added that “firms in a number of industries were facing challenges keeping up with strong demand due to widespread supply chain bottlenecks as well as labor shortages.”And officials noted that they might take time to fade.“Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed,” the minutes showed.“Participants noted that their district contacts generally did not expect these bottlenecks to be fully resolved until sometime next year or even later.”Consumer prices jumped more than expected last month, data released on Wednesday showed. The Consumer Price Index climbed 5.4 percent in September from a year earlier, faster than its 5.3 percent increase through August. From August to September, the index rose 0.4 percent, also above expectations.Housing prices rose, and food — especially meat and eggs — cost consumers more. When volatile food and fuel prices are stripped out, inflation is still rapid, at 4 percent in the year through last month.Fed officials have repeatedly said they expect price gains to moderate as the economy gets back to normal, but they have stuck an increasingly wary tone as inflation has been slow to moderate.“I believe, as do most of my colleagues, that the risks to inflation are to the upside, and I continue to be attuned and attentive to underlying inflation trends,” Richard H. Clarida, the Fed’s vice chair, said during a speech Tuesday.Among the causes for concern: Inflation expectations seem to be picking up, at least by some measures.The Federal Reserve Bank of New York’s Survey of Consumer Expectations showed this week that medium-term inflation expectations — those for three years ahead — climbed to 4.2 percent in September from 4 percent in August. That is the highest level since the series started in 2013. Short-term expectations jumped to 5.3 percent, also a new high. More

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    September Consumer Price Index: Inflation Rises

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    A key reading of consumer prices jumped more than expected last month, data released on Wednesday showed, raising the stakes for the White House and Federal Reserve as they continue to wager that rapid inflation will cool as the economy returns to normal.The Consumer Price Index climbed 5.4 percent in September when compared with the prior year, more than expected in a Bloomberg survey of economists and faster than its 5.3 percent increase through August. From August to September, the index rose 0.4 percent, also above expectations.The gains came as housing prices firmed, and as food — especially meat and eggs — cost consumers more. Stripping out volatile food and fuel, inflation is still rapid, at 4 percent in the year through last month.Monthly gains have slowed from their breakneck pace earlier this year — they popped as much as 0.9 percent this summer — but they remain abnormally rapid. And price pressures have not been fading as rapidly as policymakers had hoped.

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    Change in monthly Consumer Price Index from a year ago
    Source: Bureau of Labor StatisticsBy The New York TimesInflation jumped early in 2021 as prices for airfares, restaurant meals and apparel recovered after slumping as the economy locked down during the depths of the pandemic. That was expected. But more recently, prices have continued to climb as supply shortages mean businesses can’t keep up with fast-rising demand. Factory shutdowns, clogged shipping routes and labor shortages at ports and along trucking lines have combined to make goods difficult to produce and transport.The snarls show no obvious signs of easing, and while Fed officials still think inflation will fade, they are increasingly concerned that supply disruptions could last long enough to prompt consumers and businesses to expect higher prices. If people believe that their lifestyles will cost more, they may demand higher compensation — and as employers lift pay, they may charge more for their goods to cover the costs, setting off an upward spiral.Already, companies are raising wages to lure back employees who left the job market during the pandemic and have yet to return, and landlords are raising rents rapidly. Both factors could feed into inflation in the months ahead — and unlike pandemic-tied quirks that should eventually resolve themselves, higher wages and housing costs could become a more persistent source of price pressures.Fed officials have signaled that they would use the central bank’s policies to control inflation if it proves persistent — but they would prefer to leave borrowing costs at low levels until the job market is more fully healed. Those potentially conflicting goals could set the stage for a tense 2022.Wall Street is watching every fresh inflation data print closely, because higher rates from the Fed could dent growth and stock prices.And the White House is under pressure to come up with whatever fixes it can. Later on Wednesday, President Biden is expected to address the supply-chain problems — which are weighing on his approval ratings as they push prices higher. More

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    Wholesale Used Car Prices Rise, Pointing to Higher Inflation

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    One of the most closely watched leading indicators of inflation on Wall Street has hit a record high, a sign that upward pressure on prices could last for months to come.The prices that dealers pay for used cars in the wholesale market jumped 5.3 percent from August to September, according to the Manheim Used Vehicle Value Index. It’s up 27.1 percent from last year.Used car prices have soared since the pandemic hit, when production snarls at automakers cut the supply of new vehicles as many Americans left urban centers for the suburbs, pushing up demand for personal vehicles.While used car prices are normally a tiny contributor to the overall movement of the Consumer Price Index, one broad measure of inflation, they have become a key influence on the direction of prices.Analysts hoping to get a good read on where inflation is heading have taken note of the Manheim index’s predictive power. As a wholesale price index, it offers a preview of the price changes that consumers will see roughly two months later, after dealers pass on their costs to buyers at the lot.The movement of the Manheim index this summer suggested that consumer prices for used cars were set to cool off, which might mean overall price increases would moderate. But the latest reading suggested that the demand and prices for used cars had reinvigorated as production issues for computer chips continued to hamper new car production. Recent storms, which resulted in potentially hundreds of thousands of flooded cars, have also contributed to demand.“The new-vehicle production problem worsened instead of getting better in Q3,” wrote Jonathan Smoke, the chief economist for Cox Automotive, the company that produces the index. “Used inventory issues were further exacerbated by damage to vehicles caused by Hurricane Ida in late August, putting pressure on an already historically tight market.” More