CoBank: Inflation hanging on longer than expected

Inflation is taking longer to tame than the Federal Reserve had hoped, according to an analysis from CoBank.

Because of that fact, interest rates likely will not return to their pre-pandemic lows in the foreseeable future, according to the quarterly report from CoBank’s Knowledge Exchange.

“Inflation is proving to be more difficult to tamp down than expected,” Rob Fox, director of CoBank’s Knowledge Exchange, said in a news release. “But the Fed doesn’t want to crash land the economy after avoiding a recession for this long. Fed officials reiterated in March that three rate cuts totaling 75 basis points are still likely in 2024, despite the uptick in various inflation measures seen in the first quarter.”

Row crop farmers are in for a challenging year due to ample domestic grain stocks and the relentlessly strong U.S. dollar.

“Even more problematic for American farmers is the loss of global export market share as policy makers have eschewed trade agreements that would improve international market access,” the release said. “U.S. farmers are at an ever-increasing disadvantage to export competitors as a result.”

Inflation has abated for food at home, where prices grew just 1% over the past 12 months, according to the Labor Department's Consumer Price Index, the release said. However, inflation for food away from home grew 4.5%, outpacing the overall inflation rate.

Consumers are trading down from restaurants to eat at home as a result and are also pivoting to lower-cost, private-label brands at the grocery store, the report said. Research from the Private Label Manufacturers Association and market researcher Circana finds private label notched a 4.7% increase in dollar sales across the U.S. in 2023, rising to $236 billion.