by John Carney and Alex Marlow
Republican vice presidential nominee Sen. JD Vance (R-OH) was widely criticized last month when he complained about the price of eggs approaching four dollars.
“Eggs, when Kamala Harris took office, were short of $1.50 a dozen. Now a dozen eggs will cost you around $4. Thanks to Kamala Harris’s inflationary policies, Pennsylvania actually has seen some of the worst grocery price increases of the entire nation, and again, it’s because she cast a deciding vote on the inflation explosion act,” Vance said during a stop at a supermarket in Reading, Pennsylvania.
Critics pounced. The average price of eggs was really only $3.20 in August, they said. Others zeroed in on the price labels on shelves behind Vance, which appeared to indicate a lower price for eggs.
Even if the Ohio senator had been as incorrect as the left claimed, Vance’s talking point was politically brilliant. It focused attention across the media on the price of eggs. At $3.20 a dozen, prices were up more than double from the days when Donald Trump was president.
As it turns out, Vance was closer to the target than his critics. On Thursday, the Department of Labor released the latest inflation figures. The price of eggs jumped ten percent before seasonal adjustments—and 8.4 percent after seasonal adjustment. (Before you ask: we’re not sure why egg prices are expected to rise in September, necessitating a seasonal deflator.) Compared with a year ago, egg prices are up 39.6 percent.
The average price of a dozen eggs in the U.S. is $3.82. That’s pretty close to Vance’s estimate.
Inflation’s Rise the Latest Hit to Fed’s Big Cut
The overall consumer price index (CPI) climbed 0.2 percent in September, twice as much as expected. Core CPI, which famously excludes food and energy, rose 0.3 percent, worse than the 0.2 percent forecast and matching the prior month’s rise. On an annualized basis, that works out to a 3.8 percent pace of inflation.
Inflation can be volatile month-to-month. To get a view of underlying inflationary pressures, we like to look at the median CPI calculated by the Federal Reserve Bank of Cleveland. This rose 0.3 percent month-over-month, matching the rise in July and August. The annualized rate comes in at 4.15 percent, the highest since April.
The Cleveland Fed’s 16 percent trimmed mean measure of inflation also rose 0.3 percent, the highest since April. The annualized rate comes in at 3.7 percent, the highest since March.
Both the median and trimmed mean suggest that inflation is not falling. Instead, progress on bringing inflation down appears to have stalled out sometime over the summer, right about when the Fed started making it clear that it was in a hurry to start bringing down interest rates.
This will not come as a surprise to anyone who has been watching the money supply. M2 has been climbing since April and is now at its highest since January 2023.
This is the latest evidence in the case against the Fed’s 50 basis point cut last month. After last week’s extremely hot jobs numbers and this week’s inflation figures, it is increasingly clear that the Fed is on the wrong side of both its employment and price stability mandates. If it had just waited a few more weeks—until after the election—it would have had more information and likely would not have cut by as much as it did.
The bond market seems to have concluded that the Fed’s cut is a mistake. Yields on the 10-year Treasury have been rising ever since the Fed cut and are now firmly entrenched above four percent. By midday on Thursday, a few hours after the CPI report was released, the 10-year yield had risen to around 4.12 percent.
Rates are rising in the face of the Fed cut because investors do not think the Fed will be able to stay on its current course. The winds of inflation are blowing again, and the Fed will likely have to start tacking by putting a pause on rate cuts.
Unfortunately for the Fed, any pause after the election is likely to be seen as a judgment on the fiscal policies of the incoming administration. That perception of second-guessing the electorate could do damage to the Fed’s credibility and possibly its highly prized independence. This cost could have been avoided, of course, had the Fed simply held fast on rates until after the election.
