Whatās Going On Here?Okay, we could do with changing the record right about now: data out on Thursday showed that US consumer prices rose the most since 1982 last month. What Does This Mean?Even for a financial newsletter, weāre using the word āinflationā a lot these days. So hereās an idea: instead of saying āinflationā, letās use the word ācookiesā. Supply shortages and demand for just about everything continued to push up prices last month, with used cars and energy ā which cost about 41% and 27% more than they did in January 2020 ā accounting for a big chunk of the gains. Rent, clothing, and food were up too: 4%, 5%, and 7% respectively. That drove cookies to a higher-than-expected 7.5% ā a 40-year record. See? Weāre having more fun already. Why Should I Care?The bigger picture: Too little, too late?
The Federal Reserve (the Fed) has already said itās on track to raise interest rates next month, and data like this will give the central bank more confidence that itās making the right decision. But some economists think itāll up the ante and raise rates by 0.5% ā rather than the more typical bump of 0.25% ā for the first time since 2000. Thatād be tantamount to an admission from the Fed that itās been slow to act and needs to play catch-up.
Zooming out: PepsiCo gets cocky.
One of the reasons food costs are going up is because consumer staples are charging more for their products, and feel confident about doing so because customers need what theyāre selling. And itās clearly paying off, with PepsiCo ā which posted quarterly earnings on Thursday ā growing its revenue by a better-than-expected 12% last quarter versus the same time in 2020. And even though its outlook for this year wasnāt as strong as expected, investors ā who mightāve wanted a piece of that so-called āpricing powerā ā still initially sent its stock up. | 