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Forbes
28-05-2025
- Business
- Forbes
What To Expect From May's CPI Inflation Report
The Consumer Price Index inflation report for May will be released on June 11. Inflation nowcasting from the Atlanta Federal Reserve estimates 0.12% headline monthly inflation for May and 0.23% when food and energy prices are removed. That would be similar to the 0.2% monthly CPI price increase reported in April for both headline and adjusted for food and energy.. However, these nowcasts are primarily informed by energy price trends and historical prices, so its possible that any impact from tariffs is missed. Still, many large firms whether retailers or car manufactures have not yet adjusted pricing in response to tariffs, so May's data may not pick up a material tariff impact. 10% tariffs on most imports went into effect on April 5 with higher tariffs for China and earlier tariffs for steel and aluminum exports. Of course, tariff policy is rapidly evolving. Analysis by Today has shown that most large retailers have not increased pricing yet in reaction to tariffs, though several plan to in June or July. That may mean that any impact of tariffs may not be seen in May's CPI report and even June's report may not measure the full impact. May's CPI data might capture some impact from tariffs on used car pricing. The CPI report for April reported flat pricing for new vehicles and falling prices for used cars and trucks. However, industry trackers such as CARFAX are reporting robust pricing on used cars into May. There are also reports of car buyers rushing to purchase cars before tariffs were in effect. However, aside from Ferrari which has raised pricing 10%, most car manufacturers have held pricing for now, or even extended certain discounts more broadly. However, some overseas manufacturers have paused U.S. shipments according to analysis from Car and Driver. That may mean that the impact of tariffs on new cars is muted in May's CPI report. However, pricing for used vehicles may be stronger. Other categories could show a similar picture as corporations take some time to measure their reaction to tariffs and potentially adjust pricing. However, economists will watch the general trend in goods pricing, which is more sensitive to tariffs, as compared to services where imports are typically less of a cost driver. Despite the attention on tariffs, housing costs make up a large portion of price trends in the CPI report. Shelter costs represent just over one third of the weighting of the overall CPI price series. March and April suggest that shelter costs may be starting to soften. For example, Zillow's industry forcast sees home prices falling 1.4% in 2025. However, Zillow also forecasts rents to rise over 3%. As such, though home prices may cool in upcoming CPI reports, it remains to be seen whether they decline, in part because the CPI index aims to capture a broader estimate of the ongoing cost of home ownership, rather than simply the standalone home purchase. As such April's CPI report may be shaped as much by trends in shelter costs as the impact of tariffs. The Federal Open Market Committee will set interest rates on June 18 after the CPI report. Fixed income markets expect that interest rates will be held steady at their current level of 4.25% to 4.5%. Generally, the FOMC has signaled it intends to what the economic data play out before making a decision on interest rates with some expectation that prices may rise and growth may slow. Although, markets to expect the FOMC to cut interest rates moderately later this year. May's CPI report may show that firms, like the Fed are, for now, taking a wait and see approach in response to tariffs, though price increases may be noticeable in CPI report for June and July if statements from larger corporations are any guide.
Yahoo
23-05-2025
- Business
- Yahoo
Cash use declines as cards rise: Atlanta Fed
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The percent of consumers who said last October that they'd recently made payments with cash declined to 83%, from 87% in 2023, according to the results of a survey of payment methods by the Federal Reserve Bank of Atlanta. Similarly, the proportion of survey respondents who had used checks fell to 35% in 2024, from 40% in 2023. The most popular form of payment for all types of transactions, including purchases and bill payment, were credit cards, according to the report. Of all the transactions tracked in the survey, 35% were made with credit cards, followed by debit cards (30%), cash (14%) and bank account methods (13%), the results showed. Checks captured just 3% and prepaid cards 2%. 'Payment cards retained their dominance in the consumer sphere, representing two-thirds of payments by number and just over one-third by value,' said an abstract of the report by Fed researchers Kevin Foster, Claire Greene and Joanna Stavins. The Atlanta Fed report, called the 2024 Survey and Diary of Consumer Payment Choice, surveyed 5,583 respondents last October about their spending habits from the previous 30 days with help from the Federal Reserve Bank of Boston and the Federal Reserve Financial Services. The percentage of consumer transactions made using credit cards climbed last year over 2023 for the month when the Fed survey is conducted, rising to 35% from 32%, according to the report. The percentage for debit cards remained the same at 30%. Nonetheless, the Fed noted the persistence of cash in a May 13 press release recapping the survey's results. 'Findings from this nationally representative survey showed that amid the increasing digitalization of payments, consumers continue to use cash and keep it handy,' the release said. 'Cash ranked third as a top payment instrument among consumers, a position it has held for the past five years.' The Atlanta Fed's research also illustrates the rise of buy now, pay later services, though perhaps some reluctance to use them. While more than three-quarters (76.2%) of survey respondents said they had heard of BNPL providers, half of them were offered BNPL in the past 30 days, but only 9.7% used the service during that period, according to the survey. BNPL providers have benefited from the rise in businesses offering the payment option. On of the biggest BNPL companies, Klarna, reported this week that the number of merchants using its platform jumped 27% to 724,000. Its customer base also increased by 18% by the end of March to 99 million users. The Atlanta Fed's survey also offered signs that efforts to shield consumers from fraud threats may be working. The proportion of consumers reporting credit card and debit card theft or fraud declined to 10% and 8%, respectively, according to the survey. Still, credit and debit card fraud remains a concern. Nearly three-fourths of financial institutions surveyed by the Federal Reserve Financial Services said debit cards were the top payment method for fraud attempts in 2024, followed by checks (62%), non-bank payment apps (36%), ACH transactions (31%) and credit cards (24%). Research reports suggest that payment fraud will become a greater headache for payment providers in the coming decades. An ACI Worldwide report released last fall predicts that authorized push payment fraud losses will rise to $3.08 billion in the U.S. by 2028. Furthermore, an analysis released in January from the research firm Nilson Report projects that card payment losses will surpass $400 billion globally over the next decade.
Reuters
22-05-2025
- Business
- Reuters
Plan to beef up Fed forecasts hits hurdle among its regional presidents
AMELIA ISLAND, Florida, May 22 (Reuters) - A proposal for the U.S. Federal Reserve to release detailed economic forecasts after some of its meetings to anchor the discussion of monetary policy is drawing fire from the heads of its regional banks who worry it will be hard to agree on a common outlook and risks further confusing the public. Fed Chair Jerome Powell flagged the need for improved communications in remarks to a central bank strategy conference last week, and former Fed Chair Ben Bernanke presented a plan for staff-generated economic reports and forecasts that would be released after policy meetings four times a year. In his May 16 presentation, Bernanke said releasing a "transparent, complete and comprehensive macro forecast" would help people better understand Fed decisions and what was likely to follow, while highlighting alternative scenarios would give policymakers more flexibility to change course if the outlook changed - such as when inflation veered higher in 2021. It would also bring the Fed in line with what many of its peers are doing. Atlanta Fed President Raphael Bostic, in comments on Tuesday to reporters at a conference in Florida, called Bernanke's proposal "thoughtful and provocative," but questioned the added value of releasing a staff forecast in real time. Staff forecasts are presented internally at the Federal Open Market Committee's eight policy meetings each year, short descriptions are included in the minutes of each meeting released to the public three weeks later, and the full documentation is published five years later along with meeting transcripts. If the staff forecast is issued in real time, "would this be seen as ... the basis upon which the committee makes decisions? I struggle with that because I don't think it would," Bostic said. Among policymakers "there are 19 views, and if we add the staff report, that would be 20." "There's a hunger out there for something more. And the question I'm wrestling with my team is sort of, what's the way to satisfy that hunger? Is there a way to do it that would not lead to perhaps misleading inferences," Bostic said. Others weighed in at a joint appearance with the Atlanta Fed president and at Bernanke's presentation. "I'm always open to ideas about how we can be more transparent," Cleveland Fed President Beth Hammack said. "Practically, getting the committee to agree on one consensus forecast or even a couple of different scenarios is really challenging, and I do worry that just putting out lots more information might not actually guide the public in the right way ... It may actually leave them more confused." One aim of more detailed forecasts would be to deflect some attention from the quarterly "dot plot" chart of policymaker interest rate projections, a public communications tool that has become something of an annoyance for policymakers across the Fed system. A collection of individual submissions by up to 19 policymakers, the quarterly Summary of Economic Projections and rate projections are not aggregated into a shared outlook. Yet financial markets and the public, Fed officials say, still treat each quarterly release as a policy roadmap with undue weight placed on the median of an often wide distribution of numbers. Analysts complain it also leaves unclear what the Fed is reacting to when the rate outlook changes; whether higher rates, for example, stem from higher expected inflation, different perceptions of risk, or changes in more underlying economic forces. But Bernanke's proposal, so far, has largely just revived a battle he fought unsuccessfully when the Fed was revising its policy approach in 2012. A similar idea then was also criticized by regional Fed bank presidents who have their own technical staff, take varying approaches to modeling the economy, and would be cautious in signing off on any new product meant to shape public expectations. Limiting confusion about the Fed's plans - making clear the basis of rate decisions and the economic factors that cause them to change - is a central theme of policymaker discussions right now. Clear communications are considered important to making monetary policy effective by helping markets trade in more informed ways, decreasing volatility around policy decisions, and helping keep broader public expectations in line with the Fed's 2% inflation target. The existing approach to policy, adopted in 2020 when concerns about the COVID-19 pandemic and related high unemployment were dominant, is likely in for extensive revision driven by a common theme: Simpler is better. Changes made to the Fed's approach five years ago included a promise to use higher inflation to offset periods of lower inflation, to not use a low unemployment rate as a sign in itself of future rises in inflation, and a characterization of maximum employment as a "broad and inclusive" goal. The phrase was meant as a statement of fact about the benefits of maximum employment, and echoed the 1970s law that added a jobs "mandate" to the Fed's responsibilities, but was often construed publicly as the central bank delving into issues of economic equity that it could not really resolve. There's broad agreement inside and outside the Fed that the current approach is too complex and needs to be pared down. "A framework should be robust to a broad range of conditions," Powell said last week, warning, for example, that supply shocks and inflation spikes could become more frequent. "If the objective is to communicate to the public what the Fed is trying to do, what it's looking at, then it needs to be simpler," said Carl Walsh, an economics professor at the University of California, Santa Cruz, who dissected the Fed's 2020 framework in a paper that urged it to be clearer in its framework that maintaining stable inflation was one of the preconditions for achieving its employment goal. Officials continue to debate replacement language for the framework, which is likely to be announced in August at the central bank's annual Jackson Hole symposium in Wyoming. The discussion of what additional material to provide around the Fed's policy meetings is a separate debate being carried out in parallel. Powell last week indicated he wants change, but may face a challenge building consensus over what to do. "A common observation is the need for clear communications as complex events unfold," Powell said. "Clear communication is an issue even in relatively placid times."
Business Times
21-05-2025
- Business
- Business Times
Fed officials expect tariffs to boost prices; White House downplays risk
[AMELIA ISLAND, Florida] Federal Reserve officials said on Tuesday (May 20) that higher prices are coming on the back of rising US import tariffs and counselled patience before making any interest rate decisions before it is clear whether the inflation shock will be fleeting or more persistent. 'One thing that we have heard is that a lot of the tariff impact to date has actually not shown up in the numbers yet. There's been a lot of front-running, building inventories and all those sorts of things. And we are hearing from an increasing number of businesses that those strategies ... are starting to run their course,' Atlanta Fed president Raphael Bostic said on the sidelines of a conference in Florida. 'If these pre-tariff strategies have run their course, we are about to see some changes in prices, and then we are going to learn how consumers are going to respond to that,' said Bostic, who now expects the US central bank will have to wait longer for clarity about the economy's direction and make any changes to interest rates. 'We should wait and see where the economy is going before we do anything definitive,' said Bostic, who anticipates only a single quarter-percentage-point cut in the Fed's policy rate this year and several months on the sidelines waiting for the effect of Trump administration policies to become clear. 'I think the best action we can take is to sit on our hands and really carefully go through the data, engage with our communities, hear what they are thinking about, hear about the choices that they are making, and see how that all comes together,' Cleveland Fed president Beth Hammack said at an Atlanta Fed event. Her comments were echoed by San Francisco Fed president Mary Daly in a joint appearance. So far the main impact appears to be in sentiment surveys showing households and businesses are less confident about the economic horizon and expect higher inflation. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up In an interview on Bloomberg Television on Tuesday, Stephen Miran, who chairs the White House's Council of Economic Advisers, pushed back on the idea that the tariffs imposed by the administration so far and potentially added in coming weeks would result in meaningful inflation. 'We have been introducing tariffs since day one of this administration,' Miran said, yet there has 'been no real meaningful effect on inflation', with recent consumer price index reports coming in weaker than expected. But Fed officials and analysts say they expect the impact has just not filtered through yet to the economy. Walmart, the world's largest retailer and a major importer of goods from China, said last week that price increases were on the way, comments that drew a rebuff from US President Donald Trump. 'We can control what we can control,' Walmart CEO Doug McMillon said during the company's quarterly earnings call. Even trimming the tariffs on Chinese goods to 30 per cent, as the administration recently did in backing off a more exorbitant 145 per cent levy, 'will result in higher prices', he said. Inflation expectations The waiting game for Fed officials may prove a long one. The central bank has kept its policy rate in the current 4.25 to 4.5 per cent range since December, but says it will remain difficult to anticipate where the economy is heading until the tariff issue and other policies are settled for good – and enough time lapses after that to gauge the impact. In comments to the Economic Club of Minnesota on Tuesday, St Louis Fed president Alberto Musalem said the central bank needed to guard first and foremost against a rise in inflation expectations, and key to that effort will be assessing if coming price hikes seem like one-time increases or risk turning into something more persistent. The tariff plans may have been scaled back, but still 'seem likely to have a significant impact on the near-term economic outlook', Musalem said, with 'direct one-off effects on the prices of imported final goods, indirect effects on the prices of domestically produced goods and services, and possibly second-round effects on inflation'. Deciding in advance that the effects will fade on their own, 'runs the risk of underestimating the level and persistence', and creating more inflation trouble in the future, he said. REUTERS
Reuters
20-05-2025
- Business
- Reuters
US economy may be on the brink of price-hike wave, Fed's Bostic says
AMELIA ISLAND, Florida, May 20 (Reuters) - U.S. businesses may have run out of strategies to delay changing prices or employment in response to higher import taxes, with the economy possibly on the brink of a wave of price increases, Atlanta Federal Reserve President Raphael Bostic said on Tuesday. "One thing that we've heard is that a lot of the tariff impact to date has actually not shown up in the numbers yet. There's been a lot of front-running, building inventories and all those sorts of things. And we are hearing from an increasing number of businesses that those strategies ... are starting to run their course," Bostic said on the sidelines of an Atlanta Fed conference in Florida. "If these pre-tariff strategies have run their course, we're about to see some changes in prices, and then we're going to learn how consumers are going to respond to that."
