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Inflation is stuck

Inflation is stuck

Update: 2025-01-31

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According to the PCE price index — a measure of inflation out Friday morning from the Bureau of Economic Analysis — prices in December rose three-tenths of 1%. That is the highest monthly change since April of last year. Some of that is due to the fact that energy prices have crept up. But if you take energy out of the equation, and food too, annual inflation has been sitting around 2.7 or 2.8% since July. Christopher Low, chief economist at FHN Financial, joins us to discuss. Plus, a look at consumer spending on durable goods and how OPEC+ will respond to Trump’s call for increased oil production.

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Transcript

00:00:00

This Marketplace podcast is supported by the Glassdoor app.

00:00:03

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00:00:11

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00:00:21

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00:00:28

[MUSIC]

00:00:30

Inflation is stuck.

00:00:33

From Marketplace, I'm Sabrina Beneshoor, in for David Bruncachio.

00:00:36

According to the PCE Price Index, that is a measure of inflation out this morning from the Bureau of Economic Analysis.

00:00:42

Prices in December rose 3/10 of a percent.

00:00:45

That is the highest monthly change since April of last year.

00:00:50

Some of that is the fact that energy prices have crept up.

00:00:52

But if you take energy out of the equation in Food2, annual inflation has been sitting around 2.7 or 2.8% since July.

00:01:00

Christopher Lowe is chief economist at FHN Financial.

00:01:03

There is some good news if you dig into the details.

00:01:08

Prices excluding food and energy.

00:01:11

They rose a little less than they have in recent months.

00:01:16

But you got to squint really hard at the numbers to see it.

00:01:19

So inflation should start coming down a little bit.

00:01:23

But the fact is inflation progress has stalled.

00:01:27

The saving rate of Americans ticked down in December and has been coming down for really a couple of years.

00:01:35

What do you make of that?

00:01:37

Well, yeah, it's still relatively high by historical standards.

00:01:42

But it's the first time we've been under 4% in quite a few years.

00:01:46

Americans have been saving a lot in recent years.

00:01:51

But it has been declining.

00:01:53

If you dig into the details, what you find is that wealthy Americans, the highest earners, are very comfortable.

00:02:01

They're confident.

00:02:02

They feel good about the economy.

00:02:05

They're the ones who are doing the savings.

00:02:07

The lowest income earners, they're feeling inflation in a way that others are not.

00:02:14

And they are resorting to credit cards more than in the past.

00:02:18

It's their savings that have suffered the most.

00:02:22

Christopher Lowe is Chief Economist at FHN Financial in New York.

00:02:26

Thank you so much.

00:02:27

Thank you, Sabrina.

00:02:28

[MUSIC PLAYING].

00:02:41

[MUSIC PLAYING]

00:02:44

[MUSIC PLAYING]

00:02:48

[MUSIC PLAYING]

00:02:51

The Justice Department under the New Trump Administration has filed its first anti-trust case.

00:03:20

And it is a case inherited from the Biden administration.

00:03:23

It's looking at two companies that sell internet equipment and services that businesses use.

00:03:27

Think routers, firewalls, switches, marketplaces, and Nova Sappho has more.

00:03:31

The Justice Department says there are really only three major players in the US, which sell wireless networking gear and related services to everyone from hospitals, to universities, to small businesses.

00:03:42

There is the Behemoth, Cisco, and two rivals, HPE and Upstart Juniper, which are your go struck a $14 billion merger deal.

00:03:51

Now the Justice Department is suing on the grounds that the merger would leave just two companies dominating the market.

00:03:57

HPE and Juniper say the DOJ is counting wrong.

00:04:00

And there are a lot of competitors in the field.

00:04:03

They vowed to fight the case.

00:04:05

I'm Nova Sappho for Marketplace.

00:04:07

President Donald Trump says he wants domestic oil producers to drill more wells and pump more oil.

00:04:12

Increasing supply and lowering prices.

00:04:14

But oil prices are already pretty low.

00:04:17

And then there's OPEC, the oil cartel, and some of its allies.

00:04:20

They are meeting Monday to decide what they want to do with their oil production and therefore prices.

00:04:27

Marketplace's Kelly Wells has more on what to expect.

00:04:30

The message from Trump might be to drill, baby drill, but the message the market is sending to domestic producers is entirely different.

00:04:37

Greg Pretty is an expert in global energy markets at the center for the national interest.

00:04:42

American presidents can state what they want.

00:04:45

But that doesn't necessarily make it happen.

00:04:47

Pretty says the same rules of supply and demand apply to U.S.

00:04:50

producers and to OPEC+.

00:04:52

American oil companies act on price signals from the market.

00:04:56

They don't pump more because the government tells them to drill more.

00:05:00

Right now prices are low because the market has plenty of oil supply and demand isn't growing much.

00:05:06

So Richard Schultz expects OPEC+ to hold its production steady.

00:05:10

He shares the energy and petroleum engineering department at the University of North Dakota.

00:05:14

I'll be surprised if next Monday OPEC does anything more than just tweaks and noise.

00:05:21

He says OPEC leaders know that there's only so much Trump can do to influence the U.S.

00:05:25

market and time is on their side.

00:05:28

In my opinion, they'll do a wait and see attitude, doing whatever they need to for stability while the situation in the U.S.

00:05:37

plays out.

00:05:38

Schultz says the question then becomes how Trump will react if domestic producers don't heed his call to drill, baby drill.

00:05:46

Schultz says the president has already taken aggressive actions and made economic threats during his first week or so in office.

00:05:53

So it's possible he could do the same with the oil industry.

00:05:56

Carl Patterson says Trump isn't likely to take any big swings for now.

00:06:00

He leads the financial and sustainability advisory firm, Patterson Analytics.

00:06:04

Drill, baby drill is more a gesture to show that we're not going to vilify oil and gas anymore as opposed to really encouraging production.

00:06:16

So it's not really about finding a new market equilibrium.

00:06:18

It's more about the politics, and that becomes about asserting influence.

00:06:23

In other words, Patterson says Trump's message is mostly just that, messaging.

00:06:28

OPEC Plus has already indicated the market will support increased production again by April, right as we head into the season of more expensive summer fuel blends and higher demand due to gasoline-intensive road trips.

00:06:42

I'm Kaley Wells for Marketplace.

00:06:44

And in New York, I'm Sir Ravenna Shore with the Marketplace Morning Report.

00:06:49

From APM, American Public Media.

00:06:57

Inflation is stuck

Inflation is stuck

Marketplace / David Brancaccio and Leanna Byrne

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