Institution warns that rising diesel prices may intensify the Federal Reserve's inflation challenge

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Institution: Diesel prices hit a record high, posing a greater inflation challenge for the Federal Reserve

BlockBeats news,September 25, Apollo Global Management Chief Economist Torsten Slok warned that the inflation threat from record diesel prices could exceed the Federal Reserve's current expectations, as fuel costs are being passed through to the core Consumer Price Index.

Slok said that diesel-related transportation costs have a different impact from gasoline prices. Because the transportation of goods is vital to economic activity, from retail supply chains to data center construction, demand is highly inelastic, and price increases will ultimately be passed on to businesses and consumers.

The impact of rising diesel prices is particularly important as the Federal Reserve formulates monetary policy after its first rate hike since 2023 years ago. Inflation remains significantly above the central bank 2%'s target. The so-called core inflation measure excludes energy factors. Slok believes that the Federal Reserve cannot simply regard rising diesel prices as a temporary phenomenon, because spillover effects can affect core inflation categories.

Original link https://m.theblockbeats.info/flash/369035

Key points

Apollo Global Management Chief Economist Torsten Slok warned that the inflation threat from record diesel prices could exceed the Federal Reserve's current expectations.
The report cited Slok as saying that diesel-related transportation costs could be transmitted to the core Consumer Price Index.
Slok said that the transportation of goods is vital to economic activity, and price increases will ultimately be passed on to businesses and consumers.
The report noted that current inflation remains significantly above the Federal Reserve 2%'s target.
Slok believes that the Federal Reserve cannot simply regard rising diesel prices as a temporary phenomenon, because they may affect core inflation categories through spillover effects.

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

Diesel is used not only in vehicles but also affects supply-chain transportation. If transportation costs rise, businesses may pass more costs on to consumers, thereby affecting core inflation, which excludes energy factors.

Why it matters to readers

This could make it more difficult for the Federal Reserve to determine whether inflation is persistent when formulating monetary policy.

Core inflation typically does not directly include energy prices, but higher energy prices can still indirectly affect it through transportation and goods costs.

Risks and unknowns

The evidence does not provide specific figures for diesel prices, transportation costs, or inflation.
The evidence does not provide independent data showing that rising diesel prices have already caused core inflation to increase.
It remains uncertain whether the impact of diesel prices will persist and how the Federal Reserve will respond.

Institution warns that rising diesel prices may intensify the Federal Reserve's inflation challenge

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