Fed, investors keeping watchful eye for November inflation report

Words matter in the investing world. So does data.

Investors will be measuring one with the other Dec. 10 with the November release of consumer inflation figures.

For months, the Federal Reserve’s official position on rising prices had been that they were “transitory.” The “this-too-shall-pass” message was designed to squelch fears in the investment markets that sharply higher prices were gaining traction in the broader economy. When Fed Chairman Jay Powell characterized the higher-than-desired inflation as “transitory,” it was interpreted to mean temporary.

As spring led to summer and summer welcomed autumn, the higher rising prices have stuck around, showing few signs of cooling down. One of the largest South Florida importers told me shipping costs for furniture from southeast Asia have more than doubled. A toy importer shared with me his shipping costs from China quintupled over the summer as he was stocking up for the holidays. As some of those costs are passed along to consumers, that helps feed stronger inflation.

Last week, during his two appearances on Capitol Hill, Powell no longer described inflation as transitory in his remarks. “I think it’s probably a good time to retire that word,” he said.

He admitted the threat of higher inflation sticking around has grown, although he thinks the price trends will ease in the second half of next year. He pledged the central bank would work to “make sure that higher inflation does not become entrenched.”

That change represents more than a rhetorical shift. It is an admission obvious in the data — prices continue rising for all sorts of items, like bacon, suits, and tires. And it is an acknowledgment the Fed’s real worry is consumers expecting prices to continue spiraling.

Investors are weary of waiting for price trends to ease and watchful for inflation becoming ingrained in the economy.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView