The Producer Price Index (PPI) which is a gauge of inflation on the wholesale level, rose 0.2% in December. Year over year, the PPI index increased from 9.6% to 9.7% which is the highest number on record since they updated their measuring methodology in 2010. Core PPI, which strips out volatile food and energy prices, rose 0.5% in December. Year over year, core PPI was very hot and another record rising from 7.7% to 8.3%. This Producer or wholesale index continues to rise and often leads to hotter consumer inflation levels as they pass higher costs along to the consumer.
The Consumer Price Index (CPI), which measures inflation on the consumer level, rose by 0.5% in the month of December. The year-over-year index rose from 6.8% to 7.0%. Core CPI, which strips out food and energy prices, rose by 0.6% in December. Year over year, Core CPI rose from 4.9% to 5.4%.
With inflation creeping up, the Fed has been at the forefront explaining their plan to help temper it. They have mentioned within their Fed “minutes” that they will lower their Quantitative Easing by around $30 billion per month and that they are going to let their balance sheet “roll off”. When they mentioned this, the bond market did not like it and began to drop in price causing mortgage interest rates to increase.
Remember, as inflation increases so will mortgage interest rates, so we must pay attention to economic reporting and the Fed’s game plan so we can adjust and make our own plans accordingly.
Sources:
https://bit.ly/2Qi5FG0
https://bit.ly/3dzPNYJ
By: Jon Iacono