Tariffs are showing up in core goods within CPI, says Brookings' Wendy Edelberg

? (Correspondent) 00:00.070

let's bring in our panel joining us now brookings institution economic studies senior fellow wendy edelberg and american institute for economic research monetary economics managing director lydia mashburn newman welcome to you both wendy i mean i know you haven't kind of been

? (Correspondent) 00:14.950

able to dig into the guts of this report but it seems like a pretty benign reading how do you feel about it

Wendy Edelberg (Economic Studies Senior Fellow) 00:21.000

yeah it's frustrating because they haven't even posted the information that i would need to to really parse all of this given the the confusing way they've displayed the information but the the the important number is the year over year change in the prices of core goods and

Wendy Edelberg (Economic Studies Senior Fellow) 00:38.190

that was one point four percent and that may not sound like a lot but this is a category that in normal times has negative inflation all the time and this is where we're seeing tariffs so i think this is the category where we know that tariffs are having in some ways the

Wendy Edelberg (Economic Studies Senior Fellow) 00:57.070

absolutely expected effect on inflation

? (Correspondent) 01:01.790

yeah so for that subcomponent of inflation where you would be able to isolate perhaps the tariff effect maybe we are seeing it although lydia i guess not necessarily feeding into by this number a a broader lift in CPI

Lydia Mashburn Newman (Monetary Economics Managing Director) 01:17.060

the headline number definitely seems to be a step in the right direction at coming in at two point seven year over year we should keep in mind though that that's on some higher inflation numbers that we saw with the federal reserve 's last rate hike cycle starting at the end of

Lydia Mashburn Newman (Monetary Economics Managing Director) 01:33.420

twenty twenty four so we would expect this these upcoming readings from november and then december and january and february to look a little bit better because their relative year ago comparison was also relatively high but as wendy was saying those good services prices those

Lydia Mashburn Newman (Monetary Economics Managing Director) 01:50.470

goods prices rather are definitely an indicator of inflation showing up in tariffs showing up in inflation and what we still need to keep an eye out on services inflation while we have seen housing come down a little bit services are still elevated and that is a monetary issue

Lydia Mashburn Newman (Monetary Economics Managing Director) 02:08.870

that is related to the fed 's monetary policy and so we're still we do still have some pent up price pressures from both the feds last rate cutting cycle last year and even some overhang or maybe hangover from their post covid policies

? (Correspondent) 02:25.590

wendy given that we are able to you know identify perhaps this tariff effect in court goods what does it mean on a forward going basis because you do hear some folks who are kind of you know inflation doves who are essentially saying we're going to you know anniversary the

? (Correspondent) 02:41.510

initial tariff effects and it kind of will come out in the wash so what's your expectation for how inflation tracks from here

Wendy Edelberg (Economic Studies Senior Fellow) 02:48.830

i don't think we've seen the last of the tariff effect by any stretch i think we're only seeing a modest part of it so far for a whole bunch of reasons one of which is that we you know firms hoarded inventory ahead of the tariffs and are probably still working through that so i

Wendy Edelberg (Economic Studies Senior Fellow) 03:08.030

think tariffs are going to continue pushing up inflation through twenty twenty six and maybe even into twenty twenty seven and then at the same time by my reading the labor market is just a tick soft i think that the you know the monthly payroll employment gains have around

Wendy Edelberg (Economic Studies Senior Fellow) 03:25.910

twenty thousand a month are just slightly below what my estimate is of the break even given what i think immigration is doing to labor supply so what all that means to me is i think we have more inflation in training and i am very very puzzled by market expectations markets

Wendy Edelberg (Economic Studies Senior Fellow) 03:43.320

right now are expecting the next fed chair put in place by president trump to cut by a sum total of forty basis points my guess is if that came true president trump would be incredibly disappointed in his fed chair pick so i think we're in for lower interest rates higher

Wendy Edelberg (Economic Studies Senior Fellow) 04:04.350

inflation