Source: Barron’s
‘Sticky’ Consumer Price Index Hits a 13-Year High
As we enter the third-quarter earnings season, there has been a notable shift in the dominant economic narrative. Most clearly, the notion that inflationary pressures will prove to be “transient” is starting to be replaced by a much longer timeframe. September’s CPI [consumer price index] report was notable for the broadening of the inflationary impulse more than its actual level. This can be seen in a chart of the Atlanta Fed’s “Sticky” and “Flexible” CPI measures, which represent a division of the overall CPI basket into a cyclically sensitive and insensitive measure.
“Flexible” CPI has risen to over 13%, a level not seen since the early Volcker years, reflecting a very rapid increase of energy costs, and also some of the more idiosyncratic measures such as used-car prices and airfares. This measure has been elevated for several months, but will probably start to decline as the base effect from the late 2020 surge in prices starts to make year-over-year increases look smaller in percentage terms. However, the baton is now being passed to “Sticky” CPI, which has just broken out to a new 13-year high at 2.8%.
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‘Sticky’ Consumer Price Index Hits a 13-Year High. What That Means for Inflation
End of Barron’s material.
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Source: Forbes
Why Inflation Matters For Social Security, Medicare And Your 401(k)
Despite the Federal Reserve’s assurances that it won’t last, high inflation has become one of the dominant stories of 2021.
Retired Americans living on fixed incomes have been struggling with rising prices, but people who are still working tend to fear inflation more. One reason for this is that retirees get an annual cost-of-living adjustment (COLA) to their Social Security checks. More inflation means a bigger COLA—benefits will increase by 5.9% in 2022, for instance, the biggest boost since 1982.
Still, inflation has plenty of downsides for retirees, like pricier Medicare B premiums. Meanwhile, the Fed is eager to ease off bond purchases before they ultimately raise interest rates in the years to come, which will likely have a negative impact on retirement investments.
“The real question for retirees is will this [COLA] increase be enough to offset the rising costs of goods, or will it just lessen the blow,” said Tim Steffen, director of tax planning at Baird.
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Why Inflation Matters For Social Security, Medicare And Your 401(k)