Inflation is up nearly 6% for the year, which is higher than most experts expected.

The Federal Reserve’s main focus right now is the control of inflation. Thus, the readings we saw on inflation last week will go a long way to influence the Fed’s decision and commentary.  First, we had the Consumer Price Index, which indicated an increase of 1.3% on a monthly basis and 9.1% on a yearly basis.  Inflation is up 5.9% for the year excluding the volatile components of food and energy. In short—a very hot report which came in higher than expected.

The Producer Price Index came in at 1.1% month-to-month and 11.3% year-to-year. Again, excluding food and energy, the numbers were 0.3% and 6.4%, respectively.  The core numbers were in line with expectations, but the overall numbers exceeded forecasts. So. what do these numbers tell us?  It looks like inflation is still a major concern.  It is not likely that the Fed will stop in their tracks or accelerate based upon one month of data. The Fed is expected to raise rates, regardless of these numbers.  They certainly might influence the magnitude of the increase. Last month’s inflation indicators certainly contributed to the Fed moving .75% instead of .50% and the same range is on the table this time around.

Speaking of inflation, certainly gas prices are in the headlines on a constant basis. The war in Ukraine is expected to support gas prices at this level for some time. However, keep in mind that the average budget of Americans contains much more important components than gas prices.  For example, housing expenditures comprise a much greater percentage of their monthly budget.  If house prices stabilize and mortgage rates do not rise from here, these factors could ease some inflationary pressures.