Note to the Regents: It's Hard to Ignore

The latest reading on the Consumer Price Index is above. The 12-month figure is 8.5%. So-called "core" inflation, removing the effect of volatile food and energy, still gives you 6.5%. This information will have to factor into salary adjustments. We also noted in a prior post that the pension adjustment formula only partially reflects inflation above 2% per annum and that the Regents will need to be reminded of their "practice" of ad hoc adjustments for long-time pensioners who have suffered substantial erosion of their benefits.

Hard to ignore.

So far, the Federal Reserve has made only a modest upward adjustment of interest rates in response to inflation. It will be doing more in the future. What is now a booming economy in real terms - with labor shortages, etc. - could be tipped into a recession by aggressive moves by the Fed. Unlike the pandemic recession - which turned out not to have the expected major negative effects on the state (and thus the UC) budget - a more "conventional" recession would have negative effects.

The latest CPI news release is at:

https://www.bls.gov/news.release/pdf/cpi.pdf.