Price Woes: The Fed, Businesses, and Consumers Are All on Edge
What’s the Buzz?
Mike Shedlock on MishTalk.com says the entire economic landscape is rattled by upcoming price hikes. The Fed, businesses, and every consumer are feeling the squeeze.
Why This Matters to You
- Fed Officials: They’re trying to keep inflation from turning the economy into a wild roller‑coaster.
- Businesses: Bigger expenses mean tighter budgets and more creative cost‑cutting.
- Consumers: Your pocket feels lighter as the price tags climb higher.
How It Plays Out
- Interest rates could get jacked up.
- Production costs go up, and that gets reflected in your bill.
- Grocery shopping now feels like a mini‑financial crisis.
Takeaway—A Light‑Hearted Look
Think of it like a giant inflation parade—everyone’s marching, but the floats are carrying a hefty price tag. Stay tuned, stay savvy, and maybe stock up on some popcorn for the show.
Worried About Prices?
Could Tariff Hikes Pump Up Prices? Business Executives Think So
The Rising Tide of Tariffs
In the last few months, media chatter has been dominated by the worry that soaring tariffs might spill over into the everyday price we pay at the store—and even slow economic growth. Even Chair Powell warned after a recent FOMC press conference, “What looks likely, given the scope and scale of the tariffs, is that the risks to higher inflation and higher unemployment have increased.”
Atlanta Fed’s Sharp‑Edged Take on Cost Pass‑Through
Atlanta Fed economists think the story could be even scarier. If firms are able to transfer every dime of tariff cost to customers, retail prices might climb as high as 1.6 % (the exact number hinges on how tariff rates evolve). Even a 50 % transfer would push prices up by roughly 0.8 %, a bump that could be felt across the whole economy.
- Full pass‑through? 2018 data shows that almost all tariff costs were funneled straight into domestic prices.
- New tariff waves have hit firms hard—so the big question is: how will businesses react, especially when higher prices usually dampen demand?
Business Inflation Expectations (BIE) Survey: The Bottom Line
To get a feel for how firms plan to tackle the cost increases, the Atlanta Fed launched the Business Inflation Expectations survey. This biennial poll asks companies in the Sixth District how much of the extra cost they can pass along without hurting sales.
- The survey includes the phrase “Based on current levels of demand” to capture how much firms think they can write off prices before customers turn away.
- On average, firms say they can pass up to 51.1 % of a 10 % cost bump—and 47.3 % of a 25 % bump—without losing customers.
- Smaller sellers tend to be more conservative; larger firms, with fewer sales gaps, feel they can take on more burden.
What Does the Future Hold?
The picture is still murky on two fronts:
- Where will the average tariff rate settle?
- Will firms’ pass‑through rates rise or stumble?
For now, it seems most businesses are ready to pass on to customers a bit more than half of a 10 % rise in costs—at least until the price spike starts pulling in the foot traffic they need. Whether this is a sustainable strategy or a recipe for later demand slumps remains to be seen.
Only Three Things Can Happen
How Companies Deal with Tariffs: Pass‑Through, Absorb, or a Blend
Passing the Cost
When tariffs hit the supply chain, many firms simply shift the burden down the line.
Eating the Cost
Others decide to keep the price flat even when their costs climb.
A Hybrid Approach
Many businesses adopt a flexible mix:
Why Portfolio Flexibility Matters
The Results
When a Tariff Hits the Bank—And Your Wallet
Think of a tariff like a surprise party where everyone’s invited — but you’re the only one who gets to control whether it’s a celebration or a nightmare. The key question is: who ends up paying the bill?
War‑Bidding Wall‑Crossing Grocery Costs
If your favorite snack’s price tag gets slapped with an extra fee, the company behind it has two battle plans.
- Pass the Pain on: Push the added cost straight into your cart. The commission sticker gets a brand‑new, shiny price tag, and you can finally feel the sting of every dollar you spend.
- Take the Hit Inside: Absorb the extra charge in the margins. Save the price tag for later, but let the profit line shrink.
A good deal, some say, but the reality of the modern market paints a more nuanced picture.
Case One: Consumers Catch the Toll
When companies decide to ding you over the top, you’ll notice two general reactions:
- Feel the squeeze: Your budget feels tighter, and you start trading second‑hand burrito chips for plain rice.
- Will‑power war: You slash back other spending, sunset canned coffee for unsweetened tea, or in extreme cases, tap into that “credit” fund you’ve been avoiding.
Bottom line: an extra tariff on a product can soon turn your monthly shopping list into a financial battleground.
Case Two: Corporate Chill for the Bottom Line
When the company takes the burden of the extra cost, the bottom line takes the plunge.
- Profit drops: Every added fee reduces the “real money” they can keep.
- Balancing act: Firms might re-write entire pricing sheets to cushion their margin while staying competitive.
It’s a high‑stakes strategy that might appear savvy at first glance—but it can crumble if the market isn’t ready for a sudden price jump.
When Corporate Becomes the Wall‑Mouth
Imagine a scenario where a firm misjudges how much of the tax it can shift onto you. That misstep turns into a double whammy.
- Price shock: Consumers balk at the inflated tag.
- Profit hit: The company’s coffers shrink, and the one trade‑off they hoped would pay off falls flat.
In truth, the tariff world is more of a chess game than a simple shop. Companies love the thought of “passing it on,” but the ripple effect can cross their own limits, and so does the consumer’s pocketbook.
Your Bottom Line—So Much as It Matters
Tariff decisions may feel far from your daily routine, but the pay‑offs echo in your paycheck: extra expenses, adjustments to your budget, or a call to manage debt. In the end, though, the real winner is no human—just the invisible ledger of supply and demand, where every shift in cost is a new board move.
Corporate Profits
Why Tariffs Take a Bite Out of Corporate Profits
Picture this: your company’s cash reserve is a big, juicy whale, and tariffs are the relentless drill that keeps leaking its precious oil. If you thought those taxes would only nibble on the margins of individual business deals, think again—because the reality is that they’ll soak up a healthy slice of the aggregate corporate profits. In other words, tariffs are not just a nuisance; they’re a full‑blown drain, sapping the lifeblood of the entire corporate ecosystem. So, if you’re hoping to keep your company’s coffers plump, it’s high time you start seeing tariffs as the formidable giant that they truly are.
Fed Beige Book Shows Only 3 of 12 Regions Growing, 6 Declining
Fed Beige Book Turns Out to Be a Mixed Bag: Growth, Dreams, and a Dash of Stagflation
On June 5, 2025, the Fed’s Beige Book dropped some news that feels like a weather report for the economy: only three out of twelve regions are shouting “growth!” while the other six are waving a red flag for decline. If that doesn’t feel like a recipe for stagflation—where the price tag keeps climbing while the economy slows—maybe it’s time to grab a cup of coffee and chat.
Prices: Not a Frenzied Roller Coaster, but Still a Bit Nervous
- Rates have been creeping up at a “moderate” speed since the last slice of the report.
- Across the board, folks expect the climb to be a little steeper—think “slowly rising stairs” rather than a trampoline.
- Several districts even called these hikes “strong,” “significant,” or going to get “substantial.”
Tariffs: The Unsung Upgrades in the Cost Ledger
Every district is chipping in that elevated tariff rates are squeezing the pouch, putting pressure on everything—wages, rent, and even the cost of a decent pizza. The takeaway? Higher tariffs = higher costs = higher prices.
Bottom Line: A Quick Check‑In on Economic Mood Swings
With growth humming to the tune of a few crowded club spots and recession singing in the outskirts, the market’s feeling more of an economic cliffhanger than a lullaby. Keep an eye on the markets, folks. It’s still a wild ride—just as the Fed’s Beige Book would have it.
ISM Services Dips Into Contraction as New Orders and Backlogs Plunge
Unexpected Twist in the ISM Services Story
Picture this: On June 4, I stumbled upon a headline that sounded like a plot twist from a soap opera – the ISM Services Index slipped into contraction for the first time in months, even as prices continued their relentless dance upward.
What the Numbers Say
- The Price Index hit 68.7% in May, jumping 3.6 percentage points from April’s 65.1%.
- Over the last two months, that index has climbed 7.8 percentage points, landing at its highest level since November 2022 (where it was 69.4%).
- It’s the first time this size of two‑month rebound—think 9.2 percentage points—has happened since Feb‑Mar 2021.
- May’s reading marks the sixth straight month above the 60‑point threshold.
The Tale of New Orders and Backlog
But hold the phone—here’s the kicker. While the index on the price side is soaring, new orders and backlog of orders have taken a nosedive. It’s like a blockbuster movie where the crowd’s applause fades, yet the director keeps throwing in oversized explosions.
Why This Is a Surprise
Think of it as a “price boom, demand flop” paradox. Economists have been hearing this half‑hour, but the numbers are finally choking us with their own absurdity.
In Short
- Months of price growth (96 consecutive months!)—we’re in a record‑breaking, never‑ending upward spiral.
- Meanwhile, order pipeline and backlog are hitting a cold spot.
- Could this mean a shift from inflationary pressure to a service slowdown?
- For now, investors and analysts are scratching their heads—this is the first time the ISM Services Index is dipping while prices are climbing.
Bottom line: The services sector’s price tag is bravely marching forward, but the demand engine has hit a sudden brake. Only time—and maybe some policy tweaks—will tell us which direction will prevail.
Should the Fed Cut? Hike? Do Anything?
Fed: The Great Debate of Inflation and Jobs
Who’s in the hot seat? Everyone seems to think the Federal Reserve should slash rates because job growth is being a bit of a drama and inflation is dimming. But hold your horses—there’s a whole crowd clutching their fiscal sense‑iPhones and waving the “rate‑up” banner. They cite tariffs and the murky art of predicting inflation.
Why the split is so fierce
- Job slowdown fans: “Free‑market vibes! Let the Fed take a breather.”
- Inflation alarmists: “Prices are climbing slow‑motion; we need to tighten the brakes.”
- Free‑market advocates: “Scrap the big‑brother approach–let the market do its thing.”
The stalemate: Stagflation or the next domino fall?
If you’re tempted by the idea of stagflation—or the hope that the economy might just collapse and the Fed wont even get a chance—then we’re all on the same boat. We’re basically saying, “Why bother? It’s all a buffet of economic chaos.”
And the final spot‑see‑through? We think market forces should set the rates, not a committee or a presidential phone call. Who needs a fancy button when you can let the free market march its own tune?
Bottom line
Whether you’re a “cut‑the‑rate” nut, a “raise‑the‑rate” fan, or a go‑with‑the‑flow free‑market believer, the Fed’s seat is still a sizzling hot topic. So, buckle up—this debate is far from over.
Is the Fed in a Good Spot?
Fed’s Take, My Take, and Trump’s Tariff Trip‑Tripping Game
Full disclosure: I’m not a Fed fan. They keep waving the policy paper around like a magician’s wand, claiming the economy’s on the brink of something big. But let’s break it down…
Key Points at a Glance
- Fed’s Warning: “The economy could suddenly tip left or right with a heavy blow.”
- My Skepticism: “Sure, that’s what they say, but I’m skeptical.”
- Trump’s Tariffs: “Those crazy trade wars are just adding chaos.”
- Result: The Federal Reserve’s job is even harder.
Why the Fed’s Narrative Gets a Rough Reception
When the Fed speaks of a “sudden and severe” tilt, it’s trying to sound all doom and gloom. But economies are a bit more like a blender: they swirl, they loop, they sometimes produce a sweet smoothie or a disastrous swamp. And when a billionaire president throws in a tariff hodgepodge, it’s like adding an extra heat source that makes the blender hurt even more.
The Bottom Line
In short: the Fed’s messages are meant to keep the public on their toes, but I’m here to remind you that the market can do its own thing—especially when Uncle Sam throws in a few more twists and turns.
Fear of Making Mistakes
Fed’s Tightrope Act
Ever since the big inflation blip that got smashed the day Congress tacked on endless “free money,” the Federal Reserve has been walking a wilting ice‑cream cone. Adding even a splash of “inane” QE only stretched out that cone, turning it into a snotty, wobbling spectacle. Now, it’s not about pacing forward—it’s about staying in the lane without zig‑zagging into a policy pothole.
Why the Fed’s Gone Cautiously Passive
- Past mistakes have left a taste of regret. With the memory of that massive inflation response still fresh, the Fed is hyper‑aware of the pointy stakes.
- “Proactive” seems out of sync with the FOMM framework. The policy manual is pretty much on a “take it slow, take it steady” track now.
- Congressional free money is the last argument in the history books. The Fed doesn’t want to add another eyebrow‑raising chapter.
Bottom Line: The Fed Stays Behind the Wheel and Only Drives When It Is Sure.
Trumpian Howls
Fed vs. Trump: A Modern Musical Comedy
The Unfinished Drafts and the Uprising
The Federal Reserve’s brain is half‑busy still replaying the slap‑stick of its COVID‑era blunder, while the stage lights are set on Trump’s latest vocal solo. “Hey Jerome Powell, how about we cut that rate, man?” Trump shouted back on June 4, echoing the chorus from his “Demands Fed Rate Cut After Weakest ADP Payroll Report in 2 Years” rally. The ever‑flimsy ADP numbers—only 37,000 new private jobs in May—didn’t even bring the crowd to a standing ovation.
Friday’s Payroll Pause: A Moment of Silence
One Friday, the payroll reports took a breath, giving the Fed a brief lull before the Trump pipe‑spark tended to roar again. Two other stats spilled the details:
- Nonfarm Payrolls rose by 139,000—solid, but not the headline‑grabber the public’s craving.
- Employment Declines saw a 696,000 drop, adding drama to the financial narrative.
Fed’s Face‑Paint: Deer‑in‑Headlights or Not?
Picture the Fed as a herd animal staring at a glimmering spotlight—overreacting? Underreacting?
Right now, it’s the awkward deer trying to swagger past the light without getting shocked.
The Trump Conundrum: Hitting Two Bulls, One at a Time
No matter the path the Fed chooses—whether a cautious step or a galloping leap—critics will keep batting at its back. And all the while, its recent policy missteps will be the dam in the water, while the Trump “horn” continues to pout and snort.
Why is the Fed still stuck in this circus pit?
The answer? The Fed’s decision has high stakes, and Trump’s antics are an unending circus act under the same roof. So, one wonders if the current theater setting makes sense for a financial institution that’s supposed to be all business.
