Price Inflation Is Getting Worse

Añadido: 2026-05-23

[00:00:04]Welcome back to the Mises Lobby podcast.

[00:00:06]I'm Ryan McMaken, editor-in-chief at the Mises Institute. Be sure and check us out online at mises.org.

[00:00:14]That's mises.org.

[00:00:17]Now, let's talk a little bit about rising prices. There is no reason out there to think that prices are going to be going down anytime soon, and that means they're likely to be a significant factor in November for the midterm election, but they're just going to be a factor for everyday life uh for the foreseeable future. In spite of some reports we get that there's movement towards some sort of ceasefire that might endure uh around the Persian Gulf between the US-Israeli war on Iran uh and other Gulf states that are all producing major impacts against oil refineries and uh oil extraction in general, as well as shipping, of course.

[00:01:00]These are all factors that are pushing price increases, but on top of that, of course, is just the monetary inflation that continues to happen in the United States. There's no end in sight to that either, thanks to years and years of loose monetary policy, which became all the more aggressive during COVID, and has really not gone back to normal since.

[00:01:23]So, it's not shocking when we see new headlines like today's headline. This is uh for Friday, May 22nd. Uh the headline is "Beef prices soar as Americans prepare for Memorial Day cookouts."

[00:01:35]Specifically, beef prices are near record highs heading into the weekend, driven by the nation's smallest cattle herd in decades, drought conditions, and strong consumer demand.

[00:01:46]But wait, how can there still be strong consumer demand if prices are up and there's uh less in supply? Well, the reason is is that there's still so much extra money sloshing around in the US economy, especially since 2020, that consumers can continue to bid up prices even as we're facing rising food prices overall and rising energy prices as well. That's the only way you can have prices everywhere continue to go up even as some sectors continue to see significant increases in prices, most notably gasoline. Right? You would think that big increases in prices of gasoline would really curtail the demand for things like beef, which could easily be substituted out for something cheaper like pork sausage for a Memorial Day weekend or even chicken.

[00:02:36]But that is happening less than it would because there is still so much monetary inflation that is being felt in the economy.

[00:02:46]And we're starting to see that really affect larger aspects of the economy as well, such as in bond prices, especially since over the past week, bond yields have increased significantly, meaning that bond prices have fallen as people are demanding more, that is as bond investors are demanding more in terms of yield in order to buy more bonds. Now, why does that have anything to do with inflation?

[00:03:15]Well, it's definitely connected to inflation. We're talking about longer-term bonds, specifically 10-year and 30-year, and what we're seeing there is where some of the biggest increases in yields are. Because why? If there are concerns over inflation in the longer term, there is going to be increasing yields on bonds for those longer durations, and this is something we've seen significantly in many, many cycles, and we're seeing it now. In fact, a new headline today from Barron's is bond yields are nearing the danger zone.

[00:03:52]And specifically what Barron's reports is this, bond yields rose this month to levels that are setting off alarm bells across financial markets.

[00:04:00]The 30-year US Treasury bond yield hit 5.2% on May 19th, the highest level since mid-2007, just before the 2008-2009 financial crisis. The 10-year yield topped 4.68% the same day before retreating, but remains above 4.5%.

[00:04:20]Also notable is the fact that this trend is global. Barron's continues, yields on United Kingdom gilts, German bunds, and Japanese government bonds have also been climbing in tandem with a rise in crude oil prices since the Iran war began in late February. But these are just the latest moves in a sustained rise in yields that has been underway since long-term interest rates bottomed at historic lows in 2020 during the worst of the COVID pandemic.

[00:04:50]It's talking about what was a multi-decade trend in overall falling bond yields over that period, that is rising bond prices. It was a uh a bull market for bonds for decades. Uh since the 1980s, some might even say even longer than that uh in the larger trend. Uh but uh what's going on here is that as inflation expectations rise, you're starting to see rising yields in bonds, and it's not just in the United States. And these headlines from the other day reflect, boy, just headlines from last week where we were seeing similar reports out of Yahoo Finance talking about uh 30-year and 10-year hitting new highs, and that this was also a British, German, and Japanese phenomenon as well. So, this isn't just something that it's going to be a blip on the radar cuz it happened today or the day yesterday, and then we're not going to hear anything about it again.

[00:05:45]You're likely to see a continual drumbeat of these sorts of articles because upward pressure and yields just doesn't seem to be going away.

[00:05:56]Now, so what is the official federal government data about at least US inflation say about what the trend there is? And it turns out just in the government's official data, which I would suggest tends to understate the full impact of price inflation is showing an increasing trend there as well, and not just when you include gasoline prices, the larger trend beyond just volatile food and energy prices shows upward movement uh also. So, looking at the most recent uh Bureau of Labor Statistics data for CPI uh that was released uh last week, let's go and look at the data for the month of April, the most recent data. You can see there according to that report, the index was up by 3.8% year-over-year for April, and that's the largest year-over-year increase in 36 months. Month-over-month, the CPI was up by 0.64%.

[00:06:47]That was down from the month-over-month increase for March, but was the second largest monthly jump since June of 2022.

[00:06:56]In other words, to find similar rates of increase and growth in price inflation, you've got to go back to 2022 when Jerome Powell was claiming that inflation was very, very temporary and it was uh transient and uh it was it was going to go away soon, and he had to say that because they were reaching 40-year highs in inflation. Now, we're not certainly not back at 40-year highs yet, but uh the the overall direction is not good if you think that price inflation is a problem.

[00:07:24]Now, if we break out the CPI into some of the categories, uh we can see where a lot of that growth is coming from. Uh for the April numbers, uh we can see the CPI for energy rose by 17.9%.

[00:07:35]That's year-over-year, with gasoline up by 28.4% for the period.

[00:07:41]Moreover, nearly all major categories of the CPI showed increases in excess of the Fed's 2% target. Remember, the Fed has this 2% target it invented. So, when we're talking about anything that's 2.3, 4, 5, and now we're looking at stuff over 3%, 3 and 1/2%, that's substantial.

[00:07:58]That's well above what the Fed's target is. Now, the target, of course, should be zero or maybe even negative, since in a truly free economy you'd have declining prices.

[00:08:07]Uh but, they picked 2%. So, we're judging them just by their own standard here, and they're still well above that.

[00:08:13]We're seeing that in basically all these categories, and of course, these huge increases in gasoline. For the period, the food index uh for April is also up by 3. 2%. Shelter was up by 3.3%. So, nothing that's at or near the 2% target. Now, we can look at core CPI.

[00:08:32]That removes food and energy from the index, and we still find an upward trend there. With the For April, the index was up 2.7% for year-over-year, and the month-to-month increase was 3.37%, and that was a 16-month high. So, uh substantial growth there.

[00:08:53]Now, uh shortly thereafter that data was released, they they also released the producer price income uh producer price index data, and that's showing some of the biggest increases we've seen in quite some time as well. You have to go back to 2022, early 2023, to see similar increases, and that was when we were still in the midst of that big bump in post-COVID inflation. So, the year-over-year increase for PPI was 5.9% for April. That's the largest jump in 39 months, since February of 2023.

[00:09:27]Month-over-month, the PPI was up by 1.37%, the largest increase in 50 months. So, significant growth there. These are producer prices. These are the sorts of prices that have to be paid for businesses that are trying to produce something with uh their goods and services that they have access to.

[00:09:47]Part of the reason that the CPI tends to uh lag or or not show as large increases is that by the time you get to the consumer level, a lot of firms are trying to uh keep their prices down as much as they can so that the consumers, of course, uh will continue to buy so you're not losing market share. Uh but, as we're seeing, that that increase is quite large. Uh for the period, you got to go back a period of years to get something similar. Now, you might say, "Oh, well, these numbers don't matter that much because the Fed's preferred number is the PCE number. The The Fed doesn't use just the CPI or the core CPI. It's It's relying mostly on PCE."

[00:10:30]But, in the most recent numbers, that's showing an upward trend as well. Uh we don't have the April numbers yet for that, but March's number uh increase in the PCE was 3.5%. So, well above that 2% target again. And so, given the current trend, given what we know about food prices, oil prices, all of that, uh it'll be surprising if we see any substantial decrease in PCE for April as well.

[00:10:57]So, we can be sure that as it becomes more clear uh to everyone that price growth is really baked in now in the economy that uh there's there's good reason to suspect that we haven't even seen yet the full impact of uh the US-Iran war yet on this.

[00:11:15]Uh and that we might uh con- continue to see rising energy prices especially. But, without throughout all of this, I think we can expect to see the government and the central bank to continue to claim that the rising prices then have nothing to do with monetary policy. They They do this all the time, and they certainly did it during the big price jumps during 2022 when they tried to blame it on the Putin's price hike, for example, was a phrase that Jerome Powell used so in attempts to blame that inflation at that time on the Ukraine war.

[00:11:52]And that wasn't the reason, of course.

[00:11:53]The reason was massive monetary inflation that occurred during COVID. Now, certainly you could have if pri- if access to oil tends to be curtailed a bit, then sure, that's going to limit supply in some areas, and it's going to increase prices in some areas.

[00:12:12]But again, that would only increase prices in that part of the economy or parts of the economy that are very adjacent. You would have to see decreasing prices in some other areas in order to account for rising prices in in other areas there. If people have a fixed amount of money, and prices go up in one place, then you're going to have to see prices fall in another place. But if you see prices continue to increase everywhere, that is because the money supply continues to increase, and that's how you continue to get these CPI readings that show increases in prices in every part of the economy without substantial declines really anywhere. So, that's what we're facing now. The PR about this is going to be, "Oh, the inflation is due to something like greed." Or it's due to the Iran war only, or it's due to China. They'll they'll come up with any number of reasons to explain it away, and this will certainly be mentioned in the news articles about it. But the underlying issue, the structural issue at play, will be continued monetary inflation. That's what enables prices in all sectors to go up all together at once so that you have generally rising prices. And that's even how how mainstream uh defines price inflation at least is it's generally rising prices, but you can't have that unless you have increases in monetary inflation as well.

[00:13:37]So, we'll continue to uh keep an eye on this. Unfortunately, I don't think there's any chance of any significant deflation happening or anyone getting back the purchasing power of their dollars that they lost uh just in the last few years. So, uh keep in mind just really since 2020, people have lost about 25% of their purchasing power. And unless your income is is really doing very, very well, you're not keeping up in a meaningful sense. Uh so, we'll know more. We'll know more when the PCE numbers come out.

[00:14:04]And uh I think once we get into summer, we'll maybe start to get a sense of what the real full effect of the Persian Gulf situation is. So, till then, thank you for listening to Looten Lobby. Uh I'll be back next time with more. We'll see you then.

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