Fed survey finds price pressures building as fuel costs climb

what happened

According to Newsmetry API, citing the latest Federal Reserve report, the US labor market remains in a low-hire, low-fire state, while inflation is intensifying in parts of the country. The Beige Book, compiled from business surveys by the Fed's 12 regional banks, points to slight growth weighted toward manufacturing. Three districts described price growth as robust and eight as moderate.

Diesel prices were the main driver of rising costs, cited 21 times in the report versus two in the prior edition. Companies are passing higher fuel surcharges along the supply chain. Borrowing costs for homes also climbed: the average rate on a 30-year fixed mortgage rose last week to 7.5%, its highest level in nearly three years, the Mortgage Bankers Association said.

why it matters

The report arrives ahead of the Fed's October 27-28 meeting, where markets currently price about a 37% chance of a rate hike. Consumer prices rose 3.7% over the twelve months through September, well above the central bank's 2% target and above Reuters' poll of economists. Fuel and mortgage cost trends matter for US Treasury yields and the dollar as investors gauge how long policy stays tight.

tags

instruments