Both grades ended at 2023 highs Wednesday before pulling back modestly in the Thursday session. benchmark, extended a winning streak to nine days on Wednesday, while Brent crude, the global benchmark, rose for a seventh straight day. Oil prices have been on a tear this summer, with the rally accelerating after Saudi Arabia announced earlier this week it would extend a production cut of 1 million barrels a day through the end of the year, with Russia also pledging to extend a supply cut. Food inflation fits the same bill," said DataTrek co-founder Nicholas Colas in the note. "Recent data says energy prices hold more sway on core inflation than any time since the 1970s/1980s, so rising oil prices are a legitimate concern for both the Fed and capital markets. Energy, after all, is an input, and can have an influence on overall prices. The core personal-consumption expenditures, or PCE, index, for example, is often described as the Federal Reserve's favored inflation indicator.īut that doesn't mean rising energy or food prices can be ignored. Policy makers put more emphasis on the core reading for a better read on what they can influence. While that often leads to eye-rolling by commentators who note that food and energy make up a big chunk of what consumers spend money on, the logic behind the move holds that such items are less responsive to monetary policy. (See table below.)Ĭore measures of inflation typically strip out volatile items like food and energy. A reading of 1.0 would mean the measures were moving in perfect lockstep. It stands at 0.62 since 2020, compared with an average of 0.68 in those prior decades, and well above its long-run average of 0.31. In a Thursday note, DataTrek Research observed that the correlation between energy prices and the core reading of the consumer-price index has returned to levels seen in the 1970s and 1980s. Central bankers like to focus on core inflation readings, which strip out food and energy prices, but that doesn't mean that they, or investors, will be able to ignore a renewed surge in crude-oil prices.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |