Inflation is stuck

Summary

Marketplace Morning Report: "Inflation is Stuck" Release Date: January 31, 2025

In this episode of the Marketplace Morning Report, host Sabri Ben Ashour delves into the persistent issue of inflation, examining its current state, underlying factors, and the broader economic implications for American households and businesses. The discussion features insights from Christopher Lowe, Chief Economist at FHN Financial, as well as reports on antitrust actions and oil production policies under the new Trump administration.

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1. Current State of Inflation

Sabri Ben Ashour opens the discussion by presenting the latest figures from the Bureau of Economic Analysis:

"According to the PCE price index out this morning, prices in December rose 3.10 percent. That is the highest monthly change since April of last year."
[00:32]

He highlights that while energy prices have contributed to this increase, core inflation—excluding energy and food—has remained relatively stable:

"If you take energy out of the equation, and food, too, annual inflation has been sitting around 2.7 or 2.8% since July."
[00:50]

2. Insights from Christopher Lowe on Inflation Trends

Christopher Lowe provides a nuanced perspective on the inflation data:

"There is some good news if you dig into the details. Prices, excluding food and energy, they rose a little less than they have in recent months, but you got to squint really hard at the numbers to see it."
[01:06]

He emphasizes that despite minor signs of easing, overall progress in reducing inflation has stalled:

"So inflation should start coming down a little bit. But you know, the fact is inflation progress has stalled."
[01:14]

3. American Savings Rate Declines

The conversation shifts to the American saving rate, which has been decreasing over the past few years. Christopher Lowe analyzes the implications:

"Americans have been saving a lot in recent years, but it has been declining. If you dig into the details, what you find is that wealthy Americans, the highest earners, are very comfortable. They're confident, they feel good about the economy."
[01:39]

He points out that lower-income earners are disproportionately affected by inflation, leading to increased reliance on credit cards:

"They're the ones who are doing the savings, the lowest income earners. They're feeling inflation in a way that others are not, and they are resorting to credit cards more than in the past."
[02:07]

4. Antitrust Case Against Major Networking Equipment Providers

Sabri Ben Ashour introduces a significant antitrust case filed by the Justice Department under the Trump administration, targeting major players in the internet equipment market.

Nova Safo elaborates on the situation:

"The Justice Department is suing on the grounds that the merger would leave just two companies dominating the market."
[04:00]

The case focuses on Cisco, HPE, and Juniper, questioning whether the proposed merger would stifle competition:

"HPE and Juniper say the DOJ is counting wrong and there are a lot of competitors in the field. They vowed to fight the case."
[04:25]

5. Oil Production and Trump's "Drill Baby Drill" Policy

The episode also covers President Trump's stance on domestic oil production and its potential impact on global oil markets.

Kaylee Wells reports on the disconnect between Trump's policy messages and market realities:

"The message from Trump might be to drill baby drill, but the message the market is sending to domestic producers is entirely different."
[04:59]

Richard Schultz, an expert in global energy markets, comments on the influence of market forces over presidential directives:

"American oil companies act on price signals from the market. They don't pump more because the government tells them to drill more."
[05:17]

He anticipates that OPEC will maintain current production levels, given the oversupply and subdued demand:

"I'll be surprised if next Monday OPEC does anything more than just tweaks and noise."
[05:43]

Carl Petterson adds that Trump's "Drill Baby Drill" is largely a political gesture rather than a substantive effort to increase oil production:

"It's more about the politics, and that becomes about asserting influence."
[06:33]

6. Political Messaging vs. Market Realities

The discussion concludes with an analysis of the effectiveness of Trump's policies in influencing the oil market. Kaylee Wells summarizes the sentiment that political statements have limited impact compared to established market dynamics:

"OPEC has already indicated the market will support increased production again by April, right as we head into the season of more expensive summer fuel blends and higher demand due to gasoline intensive road trips."
[06:52]

Carl Petterson reiterates that the policy is primarily symbolic:

"Drill Baby Drill is more a gesture to show that we're not going to vilify oil and gas anymore as opposed to really encouraging production."
[06:33]

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Conclusion

The episode "Inflation is Stuck" provides a comprehensive overview of the current inflationary trends in the United States, highlighting the persistent challenges despite some underlying signs of easing. The discussion underscores the complexities of inflation's impact on different income groups and the broader economic landscape. Additionally, the episode sheds light on significant antitrust actions and the interplay between political policies and market forces in the energy sector. Through expert analysis and insightful reporting, Marketplace Morning Report offers listeners a nuanced understanding of these critical economic issues.

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Notable Quotes:

• Christopher Lowe on stalled inflation progress:

  "Inflation should start coming down a little bit. But you know, the fact is inflation progress has stalled."
  [01:14]

• Richard Schultz on market-driven oil production:

  "American oil companies act on price signals from the market. They don't pump more because the government tells them to drill more."
  [05:17]

• Carl Petterson on the political nature of "Drill Baby Drill":

  "It's more about the politics, and that becomes about asserting influence."
  [06:33]

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This detailed summary captures the essential discussions and insights from the episode, providing a clear and comprehensive overview for those who haven't listened to the podcast.

Transcript

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[Sabri Ben Ashour]

Inflation is Stuck From Marketplace, I'm Sabri Ben, ashore in for David Brancaccio. According to the PCE price index, that is a measure of inflation out this morning from the Bureau of Economic Analysis, prices in December rose 3.10of a percent. That is the highest monthly change since April of last year. Some of that is the fact that energy prices have crept up. But if you take energy out of the equation, and food, too, annual inflation has been sitting around 2.7 or 2.8% since July. Christopher Lowe is chief economist at FHN Financial.

[Christopher Lowe]

There is some good news if you dig into the details. Prices, excluding food and energy, they rose a little less than they have in recent months, but you got to squint really hard at the numbers to see it. So inflation should start coming down a little bit. But you know, the fact is inflation progress has stalled.

[Sabri Ben Ashour]

The saving rate of Americans ticked down in December and has been coming down for really a couple of years. What do you make of that?

[Christopher Lowe]

Well, yeah, it's still relatively high by historical standards, but it's the first time we've been under 4% in quite a few years. Americans have been saving a lot in recent years, but it has been declining. If you dig into the details, what you find is that wealthy Americans, the highest earners, are very comfortable. They're confident, they feel good about the economy. They're the ones who are doing the savings, the lowest income earners. They're feeling inflation in a way that others are not, and they are resorting to credit cards more than in the past. It's their savings that have suffered the most.

[Sabri Ben Ashour]

Christopher Lowe is chief economist at FHN Financial in New York. Thank you so much.

[Christopher Lowe]

Thank you. Sabri.

[Unknown]

Foreign.

[Rachel]

Hi, this is Rachel from Richardson, Texas. I love the unique perspective that Marketplace offers. As a psych major, I love listening to stories and interviews that include behavioral economics and consumer psychology, which can be hard to find in other reporting about the economy. I also enjoy hearing the experiences of small business owners around the country. Join me in supporting Marketplace with a gift today. Go to marketplace.org donate the Justice Department.

[Sabri Ben Ashour]

Under the new Trump administration, has filed its first antitrust case, and it is a case inherited from the Biden administration. It's looking at two companies that sell Internet equipment and services that businesses use. Think routers, firewalls, switches, marketplaces. NovaSafho has more.

[Nova Safo]

The Justice Department says there are really only three major players in the US which sell wireless networking gear and related services to everyone from hospitals to universities to small businesses. There's the behemoth Cisco and two rivals, HPE and upstart Juniper, which a year ago struck a $14 billion merger deal. Now the Justice Department is suing on the grounds that the merger would leave just two companies dominating the market. HPE and Juniper say the DOJ is counting wrong and there are a lot of competitors in the field. They vowed to fight the case. I'm Nova Safo for Marketplace President Donald.

[Sabri Ben Ashour]

Trump says he wants domestic oil producers to drill more wells and pump more oil, increasing supply and lowering prices. But oil prices are already pretty low. And then there's opec, the oil cartel and some of its allies. They are meeting Monday to decide what they want to do with their oil production and therefore prices. Marketplaces. Kaylee Wells has more on what to expect.

[Kaylee Wells]

The message from Trump might be to drill baby drill, but the message the market is sending to domestic producers is entirely different. Greg Priddy is an expert in global energy markets at the center for the National Interest.

[Richard Schultz]

American presidents can state what they want, but that doesn't necessarily make it happen, Priddy says.

[Kaylee Wells]

The same rules of supply and demand apply to US Producers and to opec.

[Richard Schultz]

American oil companies act on price signals from the market. They don't pump more because the government tells them to drill more.

[Kaylee Wells]

Right now, prices are low because the market has plenty of oil supply and demand isn't growing much. So Richard Schultz expects OPEC to hold its production steady. He chairs the energy and petroleum engineering department at the University of North Dakota.

[Richard Schultz]

I'll be surprised if next Monday OPEC does anything more than just tweaks and noise, he says.

[Kaylee Wells]

OPEC leaders know that there's only so much Trump can do to influence the US Market, and time is on their side.

[Richard Schultz]

In my opinion, they'll do a wait and see attitude, doing whatever they need to for stability while the situation in the US Plays out.

[Kaylee Wells]

Schultz says the question then becomes how Trump will react if domestic producers don't heed his call to drill baby drill. Shultz says the president has already taken aggressive actions and made economic threats during his first week or so in office so it's possible he could do the same with the oil industry. Carl Petterson says Trump isn't likely to take any big swings. For now, he leads the financial and sustainability advisory firm Patterson Analytics.

[Carl Petterson]

Drill Baby Drill is more a gesture to show that we're not going to vilify oil and gas anymore as opposed to really encouraging production. So it's not really about finding a new market equilibrium. It's more about the politics, and that becomes about asserting influence.

[Kaylee Wells]

In other words, Pedersen says Trump's message is mostly just that messaging. OPEC has already indicated the market will support increased production again by April, right as we head into the season of more expensive summer fuel blends and higher demand due to gasoline intensive road trips. I'm Kaylee Wells for Marketplace.

[Sabri Ben Ashour]

And in New York, I'm Sabri Ben, ashore with the Marketplace morning Report.

[Nova Safo]

From.

[Sabri Ben Ashour]

8Pm American Public Media.

[Kai]

Hey, it's Kai. My minivan and I, as I've said on the radio, have logged a lot of miles with Marketplace. Luckily, it's still running pretty well. But if your car doesn't drive as well as it used to, listen up. It can still help drive Marketplace. When you donate your old car or truck. We'll use the proceeds to support the great programs you hear every day. Start your vehicle [e-mail] vehicle.