Several inflation reports came out last week that I want to highlight for you —
· The National Federation of Independent Businessowners reported that they are having to raise wages to entice unemployed people to come back to work as many of them are making $20 an hour not working.
· The Consumer Price Index rose by 0.8% in April from March and consumer prices are up a whopping 4.2% in the last 12 months. This was the biggest monthly increase in over 10 years.
· Over the last 3 months consumer inflation is averaging 7.2% annualized.
· The Core CPI rose 0.9% last month and Core consumer inflation is up 3% from 12 months ago.
· The Producer Price Index rose 0.6% in April from March and wholesale prices are up a whopping 6.2% in the last year.
· The Core PPI rose 0.7% last month and core wholesale inflation is up 4.1% in the last year.
Denver, CO. Credit: Andrew Coop
The Fed publicly ignored these reports as they believe that inflation will be transitory or temporary. But, former NY Federal Reserve Bank President William Dudley has said he is worried that the Fed will have to raise rates very aggressively in the future and that the 10 Year Treasury Note yield could hit 4%. OMG!!! That means mortgage rates could be 5.50% to 5.75%.
Another prominent economist, Larry Summers who served under both Presidents Clinton and Obama believes there is a 67% chance that we will experience stagflation or the Fed will have to raise rates so aggressively that they will throw our economy into a recession. For those of you too young to remember stagflation here is the definition—“persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.” Our country experienced stagflation in the late 70’s under President Carter and it’s something we do NOT want to happen again.