The Fed May be Winning its War on Inflation
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As the Federal Reserve knows, you have to crack a few eggs to make an omelet. And now those eggs cost less.
The consumer-price index increased just 4% in May from a year earlier, the Labor Department said Tuesday, well below the 9% peak seen last June and even lower than the 4.9% increase in April -- placing at long last the Fed's 2% inflation white whale within eyesight. Egg prices have plummeted, the stock market is soaring, and it may be time to celebrate... at least a little bit.
Progress is looking good on a more molecular level as well. Inflation rose a mild 0.1% month-to-month in May, down from a 0.4% increase seen in April. Meanwhile, core consumer prices, a metric favored by many economists that excludes volatile energy and food costs, climbed just 5.3% in May on a year-over-year basis -- good for the lowest level in 15 months.
For consumers, the disinflation has likely already been felt -- or soon will be seen -- in a handful of key categories:
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How has the COVID-19 pandemic contributed to the current state of inflation?
New-lease rent asking prices increased just under 2% year-over-year in May, according to data compiled by The Wall Street Journal; that's well down from the double-digit spikes from a year ago, and good for one of the most significant year-over-year decelerations ever, WSJ reports. Data from Redfin shows asking rents in May actually declined 0.6% entirely year-over-year, which would've been a pre-pandemic anomaly.
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What was the percentage increase in shelter prices over the last year?
Meanwhile, gasoline prices fell almost 6% in May, and are now down roughly 20% from a year earlier (Thanks again, Putin). And though used car prices increased in May, experts say leading private sector indicators suggest they are soon due for a decline.
"We expect a more pronounced slowdown in core inflation in the coming months," Sarah House and Michael Pugliese, two Wells Fargo economists, said in a report. "That said, directional progress should not be confused with mission accomplished."
Tech Talk: After officially entering a new bull market last week, the tech-heavy S&P 500 rose again for the fourth consecutive day on Tuesday. The likelihood of the Fed's rate hikes stalling out has returned Big Tech to Wall Street's hearts. Bank of America's most recent survey of global fund managers found investors are "exclusively long" on tech stocks -- with the sector garnering its most enthusiasm since 2020. Now let's just hope there's no November 2021-style dropoff.
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What policy measures are being taken by the Federal Reserve to mitigate rising inflation?