The Week in Business: Prices Keep Climbing

What’s Up? (Oct. 9-15)

Blistering Inflation Numbers

New inflation data on Thursday dashed any remaining hopes that the Federal Reserve might soon ease off its plans to continue aggressively raising interest rates. The Consumer Price Index showed overall inflation climbing 8.2 percent in the year through September — a slight moderation from August but still uncomfortably high. Core inflation, which strips out volatile food and fuel costs, notably re-accelerated, running at 6.6 percent. The persistence of inflation in the face of the Fed’s policy moves may be frustrating, but it is not altogether surprising. Most economists expected the process of wrestling down rising prices and cooling off the economy to be slow — though it is starting to seem that even small signs of progress are not cropping up where they should. And now some worry that as inflation becomes more entrenched it could lead to a wage-price spiral, a no-win feedback loop in which rising prices lead to wage increases that then reinforce inflation.

Some Relief for Retirees

Rising prices can be particularly painful for retirees, who are often on fixed incomes and can’t seek new work as inflation eats into their earnings. Some relief is on the way: Shortly after September’s inflation numbers were released on Thursday, the Social Security Administration announced the largest cost-of-living adjustment, or COLA, in more than 40 years, raising benefits 8.7 percent beginning next year. The bump will affect roughly 52.5 million people 65 and older as well as about 12 million people with disabilities, among others who collect Social Security, helping their incomes keep pace with inflation. Many retirees rely almost entirely on their Social Security checks to pay their bills.

Banks Brace for a Slowdown

The word “recession” may be on many people’s minds, but the leaders of the biggest U.S. banks say they aren’t panicking yet. Reporting on JPMorgan Chase’s third-quarter earnings, the bank’s chief executive, Jamie Dimon, said consumers were still “healthy,” pointing to a strong jobs market and the household savings cushions that he said were keeping credit card spending up. Wells Fargo’s chief executive, Charles Scharf, said his bank’s customers remained in “strong financial condition.” But these banks are still taking steps to prepare for what Mr. Dimon warned were “significant headwinds immediately in front of us.” Citigroup, JPMorgan Chase and Wells Fargo all reported smaller profits compared with the third quarter of last year, and they said they had made provisions to protect against future loan losses.

What’s Next? (Oct. 16-22)

A Slowing Housing Market

Throughout the year, higher borrowing rates have been taking a toll on the housing market, another area where Fed policymakers look for evidence of a slowing economy. New data to be released this Thursday will probably show a continued downturn. Analysts expect existing-home sales to fall for the eighth consecutive month, mirroring the string of declines during the housing market crash that helped set off the 2008 financial crisis. Also on Thursday, Freddie Mac, the mortgage finance giant, is expected to report that rates on 30-year mortgages have surpassed 7 percent — another data point not seen since 2008. Rising mortgage rates are one reason for the cooling market, but broader uncertainty about the economy is also a big contributor. Many would-be home buyers may be spooked by factors like recent hiring freezes at major companies and stubbornly high inflation numbers — not to mention the sticker shock of house prices.

Article source: https://www.nytimes.com/2022/10/16/business/the-week-in-business-inflation.html