This week provided a reminder that inflation isn’t going away anytime soon

From
consumer
and
wholesale
prices
to
longer-term
public
expectations,
reports
this
week
served
up
multiple
reminders
this
week
that

inflation
isn’t
going
away
anytime
soon.

Data
across
the
board
showed
pressures
increasing
at
a
faster-than-expected
pace,
causing
concern
that
inflation
could
be
more
durable
than
policymakers
had
anticipated.

The
bad
news
began
Monday
when

a
New
York
Federal
Reserve
survey
showed
the
consumer
expectations
over
the
longer
term
had
accelerated
in
February.
It
continued
Tuesday
with
news
that

consumer
prices
rose
3.2%
from
a
year
ago,
and
then
culminated
Thursday
with
a
release
indicating
that
pipeline

pressures
at
the
wholesale
level
also
are
heating
up.

Those
reports
will
provide
a
lot
for
the
Fed
to
think
about
when
it
convenes
Tuesday
for
a
two-day
policy
meeting
where
it
will
decide
on
the
current
level
of
interest
rates
and
offer
an
updated
look
on
where
it
sees
things
heading
longer
term.

“If
the
data
keep
rolling
in
like
this,
it
becomes
increasingly
difficult
to
justify
a
pre-emptive
rate
cut,”
wrote
Steven
Blitz,
chief
U.S.
economist
at
TS
Lombard.
Taken
together,
the
numbers
show
“the
great
disinflation
has
stalled
and
looks
to
be
reversing.”

The
latest
jolt
on
inflation
came
Thursday
when
the
Labor
Department
reported
that
the

producer
price
index,
a
forward-looking
measure
of
pipeline
inflation
at
the
wholesale
level,
showed
a
0.6%
increase
in
February.
That
was
double
the
Dow
Jones
estimate
and
pushed
the
12-month
level
up
1.6%,
the
biggest
move
since
September
2023.

Earlier
in
the
week,
the
department’s
Bureau
of
Labor
Statistics
said
the

consumer
price
index,
a
widely
followed
gauge
of
goods
and
services
costs
in
the
marketplace,
increased
0.4%
on
the
month
and
3.2%
from
a
year
ago,
the
latter
number
slightly
higher
than
forecast.

While
surging
energy
prices
contributed
substantially
to
the
increase
in
both
inflation
figures,
there
also
was
evidence
of
broader
pressures
from
items
such
as
airline
fares,
used
vehicles
and
beef.

In
fact,
at
a
time
when
the
focus
has
shifted
to
services
inflation,
goods
prices
leaped
1.2%
in
the
PPI
reading,
the
biggest
increase
since
August
2023.

“There
continue
to
be
signs
in
PPI
data
that
the
disinflation
in
goods
prices
is
largely
coming
to
an
end,”
Citigroup
economist
Veronica
Clark
wrote
after
the
report’s
release.

Taken
together,
the
stubbornly
high
prices
appear
to
have
taken
their
toll
on
both
consumer
expectations
and
behavior.
While
substantially
lower
than
its
mid-2022
peak,
inflation
has
proved
resilient
despite
the
Fed’s
11
rate
hikes
totaling
5.25
percentage
points
and
its
moves
to
cut
its
bond
holdings
by
nearly
$1.4
trillion.

The
New
York
Fed
survey
showed
that
three-
and
five-year
inflation
expectations
respectively
moved
up
to
2.7%
and
2.9%.
While
such
surveys
often
can
be
especially
sensitive
to
gas
prices,
this
one
showed
energy
expectations
relatively
constant
and
reflected
doubt
from
consumers
that
the
Fed
will
achieve
its
2%
mandate
anytime
soon.

On
a
policy
level,
that
could
mean
the
Fed

may
hold
rates
higher
for
longer
than
the
market
expects.
Traders
in
the
fed
funds
futures
market
earlier
this
year
had
been
pricing
in
as
many
as
seven
cuts
totaling
1.75
percentage
points;
that
since
has
eased
to
three
cuts.

Along
with
the
surprisingly
strong
inflation
data,
consumers
are
showing
signs
of
letting
up
on
their
massive
shopping
spree
over
the
past
few
years.

Retail
sales
increased
0.6%,
but
that
was
below
the
estimate
and
came
after
a
downwardly
revised
pullback
of
1.1%
in
January,
according
to
numbers
adjusted
seasonally
but
not
for
inflation.

Over
the
past
year,
sales
increased
1.5%,
or
1.7
percentage
points
below
the
headline
inflation
rate
and
2.3
points
below
the
core
rate
that
excludes
food
and
energy.

Investors
will
get
a
look
at
how
policymakers
feel
when
the
rate-setting
Federal
Open
Market
Committee
convenes
next
week.
The
FOMC
will
release
both
its
rate
decision
—
there’s
virtually
no
chance
of
a
change
in
either
direction
—
as
well
as
its
revised
outlook
for
longer-term
rates,
gross
domestic
product,
inflation
and
unemployment.

Blitz,
the
TS
Lombard
economist,
said
the
Fed
is
correct
to
take
a
patient
approach,
after
officials
said
in
recent
weeks
that

they
need
more
evidence
from
the
data
before
moving
to
cut
rates.

“The
Fed
has
time
to
watch
and
wait,”
he
said,
adding
that
“odds
of
the
next
move
being
a
hike
[are]
greater
than
zero.”