The economy is growing, but the price of many goods is rising. Chefs, nonprofit leaders and others talk about the effect of higher costs on their businesses.
Amid the geopolitical turmoil, consumers are paying more for everything from coffee and shoes to pet grooming and food. Prices for services like these are rising twice as fast as those for goods like cereal and ice cream. We examine the reason why and how this is happening.
Basic economic thinking leads one to expect certain rela- tionships between economic news and asset prices, such as stock and bond prices and interest rates. In particular, a surprise about unexpected strength in the economy or inflationary pressure is expected to push up interest rates, because it is seen as pressuring central banks to pursue tighter monetary policy.
However, our analysis suggests that these expectations are misplaced. In fact, only a small number of economic announcements give rise to a significant and measurably per- sistent asset price response that lasts through the business day. Furthermore, the responses are strongest for bond prices and weakest for equities.
We show that the results are most pronounced for news reports that contain multiple indicators, such as the Employment Situation Summary and the Nonfarm Payrolls Report. To measure the impact of these news releases, we use a new methodology that captures the impact over two time intervals: thirty minutes after the release and from before the report through 4 p.m.