The consumer price index shows that inflation remains high

July inflation numbers came out this week from the Bureau of Labor Statistics. Micheal Clements shares what they mean for farmers and ranchers.

Clement: Year-on-year consumer inflation in July was 8.5%, down from 9.1% in June. Month-to-month inflation was zero percent, although that was largely the result of a 4.6 percent drop in energy prices. Roger Cryan, chief economist of the American Farm Bureau Federation, says inflation remains a concern.

cryan: Food prices were nearly 11% higher than a year ago and rose more than 1% in the month alone, and this will continue to be a problem as demand is and will remain high, and farmers around the world are facing problems such as drought and high fuel and fertilizer prices and, not to mention the war in Ukraine. The Federal Reserve Bank injected a lot of dollars into the economy in 2020-2021. And now the Fed is raising interest rates and selling assets to absorb some of those dollars. We are going to see headline inflation in the range of 5-9% through 2024.

Clement: Cryan says the economy remains strong, but the market remains tired.

cryan: Job vacancies are a little lower than a few months ago, but they are still well above pre-2021 levels. There are ten million job vacancies in the US economy right now. This means that there is still a lot of demand in the economy. But we have a strong narrative in the market that says if the Fed raises rates recession will happen and that narrative leads to overreaction and that overreaction could lead to continued recession.

Clement: Cryan says there are upsides for farmers and ranchers.

Cyran: A recession does not help farmers, but commodity prices are still relatively high and if fuel and fertilizer prices continue to fall, that would be a big help. And the Fed’s now, finally, serious attack on inflation, I think, is helping to restore confidence in the market that inflation won’t be a long-term problem. So we’re already seeing long-term interest rates start to come down, which is very helpful for farmers when they’re looking to invest, and short-term interest rates will come down once inflation is defeated, that could take a few years.

Clement: Michael Clements, Washington.

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