The record price of diesel threatens to stoke inflation at a time when consumers are already price-sensitive and businesses are reeling from higher costs due to trade tensions.
Why it matters: Diesel is a key cost throughout the supply chain, meaning soaring prices could eventually show up in what consumers pay for everything from groceries to household goods.
Headline CPI rose 0.4% in August, its biggest monthly increase since May, with gasoline accounting for more than a third of the increase.
The Fed typically looks through temporary supply shocks, but a sustained energy surge risks spilling into other prices — and energy price pressures have only escalated further in September.
Zoom out: Central banking orthodoxy would suggest not responding to energy price shocks directly, but responding to the extent that swings in fuel prices are filtering through to broader prices.
Unfortunately for anyone seeking lower borrowing costs, there is evidence that this is indeed happening, risking energy-driven inflation becoming more entrenched.
Soaring diesel fuel prices are affecting the price of transportation of all sorts of goods, with the biggest effects on bulky or heavy items.
Airline fares were up 2.7% in August alone and are up 23.4% over the last 12 months.
Between the lines: If energy price relief were in progress, it would be easier to look through those price surges. No relief is in sight, however.
Those figures are already backward-looking. The energy shock has since worsened this month, with oil prices around $100 a barrel and diesel topping $6 a gallon for the first time on record — all pointing to more inflation pressure still to come.
Consumer prices remained elevated in August as the Iran war's energy shock fueled a fresh burst of inflation.
Why it matters: The renewed price pressures are squeezing household budgets, with signs that underlying inflation is proving stubborn across the broader economy.
The data could strengthen the case for the Federal Reserve to raise interest rates next week.
SPENCER GLACIER, Alaska — Sure, seeing is believing, but sometimes seeing leaves you in disbelief. That happened to me while kayaking among icebergs here recently, as the landscape transformed before my eyes.
Why it matters: I began the excursion certain of what I was seeing. I ended it with my mind blown — by the sheer scale of nature and by how much perspectives can change.
