ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Economy

Inflation on the Rise

November 14, 2018
Reading Time: 2 mins read

By Jack McCabe

After remaining depressed for most of the recovery period, inflation has moved back up toward the Federal Reserve’s 2 percent target over the past year. The personal consumption expenditures index—the Fed’s preferred measure of inflation—came in at 2 percent in March and remained slightly above this threshold over the following three months on a year-over-year basis.

Click to enlarge.

The core PCE index, which excludes the volatile food and energy categories, briefly touched 2 percent in May before retreating slightly to 1.9 percent in June. A similar trend occurred at the end of 2016, after which inflation fell to as low as 1.3 percent by August 2017. The question now is if this recent uptick in inflation will sustain or even move higher, or if this is another transitory event.

Another measure of inflation, the consumer price index, has trended a bit higher, rising to 2.9 percent in July on a year-over-year basis (the latest available data at time of publication). The major driver of the headline index has been the increase in energy prices, which are up 12.1 percent over the last year. The core index rose to 2.4 percent, driven in large part by shelter costs, as the core CPI excluding shelter rose only 1.5 percent over the last year. Outside of shelter costs, there are few areas that are a cause for concern.

Wholesale inflation has also increased over the past year, as the producer price index rose to 3.3 percent in July on a year-over-year basis. The core PPI, which excludes food, energy and trade services, was up 2.8 percent. In the first half of this year, the headline index has been pushed up by rising oil prices, while an increase in transportation costs contributed to the rise in the more stable core index. In the first half of the year, uncertainty over trade policies had yet to have a major effect on inflation measures, but broad-based tariffs could eventually put an upward pressure on prices.

While these measures of inflation have firmed over the first half of 2018, there is no overwhelming evidence that the trend is bound to continue. The annualized rate of inflation in the PCE, core PCE, CPI and core CPI indexes actually softened in the second quarter compared to the first quarter of the year. On an annualized basis, PCE and core PCE were 2.5 percent and 2.2 percent, respectively, in the first quarter. They decelerated to 1.8 percent and 2 percent, respectively, in the second quarter. CPI and core CPI display an even greater deceleration, as they grew at an annual rate of 3.5 percent and 3 percent, respectively, in the first quarter, but retreated to 1.7 percent and 1.8 percent, respectively, in the second quarter.

There is evidence that inflation has picked up in the third quarter in certain sectors of the economy, but it is important to look at the entire picture, and not just headline numbers. It will be prudent to keep a detailed eye on the inflation reports moving forward, especially with wage growth strengthening and tariffs proposed by the administration beginning to take effect. The Federal Reserve—specifically Chairman Jerome Powell—has signaled a willingness to let inflation run a bit above its symmetrical two percent target as the economy may not be at full employment yet. However, if there are clear signs of a substantial increase in inflation, the Fed will act swiftly to bring it back to target.

ADVERTISEMENT
Tags: CPI
ShareTweetPin

Related Posts

FDIC: Number of unbanked households drops to new low

Kansas City Fed economist: Bank On may have reduced unbanked rates

Community Banking
May 19, 2025

An increase in the number of financial institutions offering Bank On-certified accounts may have contributed to the decline in unbanked households by lowering barriers to account ownership, according to new research.

ABA DataBank: Higher costs, less credit

ABA DataBank: Higher costs, less credit

Economy
May 16, 2025

Despite temporary tariff relief, small businesses still face elevated costs from historically high tariffs on Chinese goods.

Consumer Sentiment declined in April

Preliminary: Consumer sentiment fell 1.4 points in May

Economy
May 16, 2025

The University of Michigan Consumer Sentiment Index decreased 2.7% in May compared to the month prior, landing at 50.9, according to preliminary results for the month.

Housing starts rise in August

Housing starts rose in April

Economy
May 16, 2025

Housing starts increased by 1.6% in April from the month prior to a seasonally adjusted annual rate of 1.34 million, the Commerce Department reported.

Mortgage rates fall

Mortgage rates rise

Economy
May 15, 2025

The rate for a 30-year fixed-rate mortgage was 6.81% this week. The rate for a 15-year fixed-rate mortgage was 5.92%.

Producer price index increased 0.5% in April

Producer price index decreased 0.5% in April

Economy
May 15, 2025

The Producer Price Index decreased 0.5% in April from the previous month, the Labor Department reported.

NEWSBYTES

#PracticeSafeChecks campaign wins two Telly Awards

May 21, 2025

Proposed amendment would add credit card rate cap to Senate stablecoin bill

May 21, 2025

ABA, associations urge senators to reject adding credit card routing mandates to stablecoin bill

May 21, 2025

SPONSORED CONTENT

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025
AI for Banks: A Starter Guide for Community and Regional Institutions

AI for Banks: A Starter Guide for Community and Regional Institutions

March 1, 2025

PODCASTS

Podcast: Accelerating banking for quick-service restaurants

May 8, 2025

How a Georgia community bank supports government-guaranteed lending nationwide

May 1, 2025

Podcast: Quantum computing’s shakeup in payments, cybersecurity

April 24, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.