Planet Money Indicator: NPR

SYLVIE DOUGLIS, BYLINE: NPR.

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ADRIEN MA, HOST:

This is THE PLANET MONEY INDICATOR. I am Adrian Ma.

DARIAN WOODS, HOST:

And I’m Darian Woods.

MA: And today we are joined by a very special guest. No, no – more than a guest – a new co-host…

WOOD: Yes.

MA: …It will be with us for the next few months.

WOODS: She’s already graced our feed with incisive analysis of algorithms, she’s talked about odious debt, and she’s also ushered us into the world of broadband network speeds. Adrian, you do the honors.

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MA: Dear listeners – today we welcome the one and only Wailin Wong.

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WOODS: Wailin Wong – whoo whoo whoo (ph).

WAILIN WONG, HOST:

Hello. You are the best hype men.

MA: Welcome.

WOODS: (Laughs).

WONG: I’m thrilled (laughs).

WOODS: Glad to have you here for Indicators of the Week and for future episodes. It’s going to be good.

So Wailin, what caught your eye as particularly revealing this week?

WONG: Well, I’ve been keeping tabs on the Federal Reserve — so that’s the central bank we have in the United States — and they signaled this week that they’re likely to become more aggressive in their fight against the inflation.

WOODS: Inflation is very high in the United States, but it’s also high in other countries, which is going to be my indicator.

MA: But the prices of at least one product are falling. Our three indicators for the week after the break.

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WOODS: These are the indicators of the week. Wailin Wong, what have you got for us?

WONG: Well, you might recall that last month the Federal Reserve raised interest rates for the first time since 2018, and it did so by a quarter of a percentage point.

MA: Yeah. I remember talking about it, and it wasn’t a huge surprise, was it? The Fed had signaled that it would raise interest rates to keep up with inflation.

WONG: Exactly. So there’s not a lot of suspense around the decision itself, but Fed rate decisions come out of these regular meetings where central bank officials from across the country get together, and they talk about policy, then a small group will vote on What to do. So this week the Fed released the minutes of that March meeting, and those minutes are really important because they give some insight into that kind of behind-the-scenes discussion leading up to the decision.

WOOD: Oh.

WONG: Plus, the write-up usually contains juicy hints about what the Fed might do in its upcoming meetings.

WOODS: What stands out from these minutes?

WONG: Well, according to the minutes of that March meeting, many at that meeting would have preferred to raise interest rates by half a percentage point. So that’s my indicator – half a percentage point.

WOODS: The half percentage point that never was.

WONG: He’s the one who got away, but just for now.

MA: So why, then, did they settle for the smaller increase – I mean, if all those people at the March meeting were saying they wanted the half point?

WONG: Well, according to the minutes, they kind of went for this lower increase because the war in Ukraine is causing so much uncertainty, especially around things like energy prices and chain disruptions supply. These are factors that have contributed to the rise in inflation, and inflation is still very volatile in the short term. But the minutes also indicated that many people present at the meeting believed that one or more interest rate hikes of this magnitude – half a percentage point – might be appropriate at future meetings, that is. therefore a fairly strong signal that the Fed is ready to act more quickly on inflation.

MA: Hmm.

WOODS: That’s right. To the right. To the right.

WONG: And half a percentage point would be a big step. The Fed hasn’t raised rates that much since 2000. But, you know, when you think about it, inflation is at its highest level in 40 years, so it makes sense that the Fed is acting more aggressively than we are. haven’t seen it. in a long time.

MA: So inflation in the US has turned out to be more rigid than the central bank might have hoped, but, Darian, you said it’s not just a US problem.

WOOD: Yeah. I mean, on this show, we talk a lot about the issue of US inflation – which is appropriate because inflation is very high right now, around 8% – but it’s happening all over the world. My indicator is that 3 out of 5 rich countries around the world are in a similar boat. Their prices are increasing by more than 5% per year. This stat comes from the Bank for International Settlements, and you can think of them as a central bank for central banks. And 3 out of 5 rich countries having an inflation problem is quite significant, considering that a few years ago no rich country would have had this problem, and now it’s the majority. And inflation is even on the rise in places that have historically had very low inflation, such as Switzerland.

WONG: Well, if my dubiously acquired wealth is not safe in Switzerland, where can it be safe?

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WOODS: Wailin, I didn’t know you had acquired dubious wealth.

MA: I’ll tell you what – I’ll send you my Venmo later.

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WOODS: Yes, send them there.

MA: I will keep it safe.

WOODS: Adrian will keep them safe for you. But, you know, you could park it in some remaining places that haven’t had very high inflation yet – maybe Japan or China – but I wouldn’t be surprised if the inflation spike hits soon these countries too. For example, we all buy the same coffee beans and the same microwaves wherever we are in the world, so it can be difficult to protect your country from this global inflationary episode. And that’s what many low-income countries are seeing, and inflation is even more of a problem in those countries.

WONG: I guess my question would be – so we’ve heard a lot about how the US government may have caused a little inflation by doing stimulus checks and increasing unemployment assistance – sort of , injecting more money into the economy.. .

WOOD: Yeah.

WONG: …But not all countries have done that, have they?

WOODS: That’s absolutely true. So basically every wealthy country had a version of what happened in America – like some sort of spending relief package or lower interest rates at the start of the pandemic – but it’s true that they haven’t all gone as far as the US So I would say, number one, don’t underestimate the US consumer. Their fallout has, you know, ricocheted around the world. But I would also say there’s been this overall shift from services – from going out and traveling and spending on hotels – to goods – to refrigerators and upgrading your dishwasher and buying a new television. For example, this has persisted throughout the pandemic, all over the world, and the supply hasn’t been able to keep up with this demand for goods, and this is clogging up the gears, and this inflation is spreading to all kinds of goods, beyond just supply chain issues.

WONG: But I’ve heard there might be a silver lining in this cost-of-living quagmire…

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WONG: …We found each other. Adrian, are you here to cheer me up?

MA: I will try. I’ll try. My indicator – it’s used cars, and it’s from this company called Manheim. Basically, Manheim is a big player in the wholesale used car market, and they came up with this metric to measure the price of used cars. They call it the Manheim index. And the March numbers just came out for the Manheim index, and they were 3.3% lower than the previous month.

WONG: Maybe the price hikes are finally stopping?

M.A.: Right. This is, in fact, the biggest drop in this index for used cars in about two years.

WOOD: Wow.

WONG: Wow. So almost, like, the whole pandemic, then.

MA: Yeah. For about 24 months straight, used car prices have been on this huge tear, haven’t they? So, of course, blame the pandemic-induced demand for cars, blame the supply chain issues that have slowed production of new cars, and when you look at the numbers for some of the last few months, they’re just mind-boggling, is not it ? In some months, used car prices were 40% higher year over year.

WOODS: I mean, I’ve heard stories of used cars costing more than new cars.

WONG: Oh, that’s wild. It’s wild.

MA: Obviously it’s not good for people looking for wheels, is it? – but even for car salesmen. They couldn’t even find enough cars to sell. Like, for example, I got at least half a dozen text messages from this dealership in Ohio that I bought a car from over four years ago, and they keep asking me , like, hey, do you want to sell us your car? Please?

WONG: (Laughs).

MA: And I say to myself, no, I need it. Stop asking me.

WOODS: They’re sorry they sold it to you, Adrian.

WONG: (Laughs).

MA: Yeah, but that’s how much, apparently, used cars were in demand.

WOODS: That’s interesting.

MA: Either way, the decline in the Manheim index may be a sign that used car prices have peaked for the time being. And if that makes you excited, you know, maybe keep your foot on the brake because, well, used car prices may have come down in recent weeks, but according to the Manheim index, they are still about 25% higher than they were a year ago. So, in the end, used cars – always much more expensive than they were before.

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WONG: There you go, three inflation indicators. We’ll have more on Tuesday as the latest Consumer Price Index numbers come out. Until then, have a good weekend everyone.

MA: This episode was produced by Nicky Ouelett, with help from Gilly Moon. It has been verified by Corey Bridges. Viet Le is our main producer. Kate Concannon is editing the show and THE INDICATOR is an NPR production.

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