This article in the Wall Street Journal is getting a bit of attention this morning.
It is gated: As Food Prices Rise, Fed Keeps a Watchful Eye
Central Bank Officials Sometimes Look Past Food-Cost Increases
The gist of it that food price inflation in the US is rising but these can be very volatile and so central bankers try to assess whether such increases are temporary, they pay more attention to broad inflation trends.
That’s a brutal summary of the article, there is (obviously) more detail at the link.
- consumer price of ground beef in May rose 10.4% from a year earlier while pork chop prices climbed 12.7%
- The price of fresh fruit rose 7.3% and oranges 17.1%
- But prices for cereals and bakery products were up just 0.1% and vegetable prices inched up only 0.5%
The uneven rise points to disparate forces affecting food prices:
- Drought in Oklahoma and Texas is driving up cattle prices
- A disease … has killed millions of piglets and contributed to higher hog prices
- A disease known as citrus greening is killing Florida’s orange and grapefruit trees, driving up citrus prices
- Most of the shrimp eaten in the U.S. comes from Southeast Asia, where a bacterial infection has devastated stocks
- Coffee prices have risen this year due to a drought in Brazil
These factors suggest recent food inflation springs from special factors constraining supplies in a few areas, as opposed to broad increases in demand, which might propel the kind of across-the-board consumer prices increases that the Fed tries to stem.
The broad PCE index was 1.8% higher in May than a year earlier, its 25th straight month below the Fed’s target. Still, it has accelerated from a 0.8% rise as recently as February. Excluding food and energy the index has picked up to 1.5% from 1.1%, suggesting that broader factors are starting to drive inflation higher.
