Inflation held steady in August. Yay?

Kai Ryssdal (0:02)

On the program today, money, and how much it costs, and debt, and how much is too much. From American Public Media, this is Marketplace.

In Los Angeles, I'm Kai Ryssdal. It is Thursday today. This one is the 1st of October. If you can believe it, good as always to have you along, everybody. You know, there's a developing truth in this economy, that money is going to be much more expensive than we have been used to for much longer than we are ready for. As evidence, I refer you to, and yes, I know, the bond market yet again yields on long-term government debt while a hair softer today have been high and rising for weeks now with no real relief in sight. We called Tara Sinclair, she's the chair of the economics department at George Washington University, out on the road.

Tara Sinclair (1:05)

I'm in Nashville, which means that the hotel lobby is incredibly loud and so we are very happy we got a room.

Kai Ryssdal (1:13)

As are we. Those higher yields mean money is more expensive, not just for the government, but for anybody trying to borrow.

Tara Sinclair (1:19)

Which means that if you want to get a mortgage, it's going to be more expensive. If you want to have credit card debt, it's going to be more expensive. If you're a business and you want to have a business loan, it's going to be more expensive.

Kai Ryssdal (1:29)

The way it works, we all know this. When something gets more expensive, you don't have to be an economist to understand that people are going to use less of it, so fewer purchases are going to be made, from buying a house to swiping your credit card. And that is going to slow economic growth.

Now, as bond yields and interest rates go higher?

Tara Sinclair (1:49)

There isn't some specific number that's going to immediately destroy the economy.

Kai Ryssdal (1:55)

All right, that's good.

Tara Sinclair (1:56)

There are these moments, like hitting 5%, where the markets look around and say, is this a good use of our money? Or should we be looking for higher returns elsewhere and stop being so interested in buying government debt?

Kai Ryssdal (2:10)

Well, that sounds bad.

Tara Sinclair (2:11)

And that's the really scary point, because if people start looking at government debt and don't think of it any longer as something that's risk-free, then the cost will go up even more.

Kai Ryssdal (2:23)

The 10-year Treasury note today, the yield on it, 5.23 percent, slightly, as I said, lower at the close did hit a quarter-century high at one point during the session. Equities just kind of treading water. We will have the details when we do the numbers.

One of the things we do around here, so you all don't have to, is dig deep into the data to try to get a sense of the bigger picture. The data in question today is the personal consumption expenditures index that we got yesterday, 3% year on year. That's the core inflation number. And as it turns out, it was a bit of a surprise, lower than people had been guessing. Marketplace's Kristen Schwab has more.

Kristen Schwab (3:30)

This inflation report kind of feels like when you're on a flight that lands early, but you sit on the runway for forever because there's no gate, so your arrival time ends up being the same anyways. Like yay?

Stephanie Kelton (3:42)

You can look at these numbers from a lot of different angles, and sometimes they look prettier than they do from other angles.

Kristen Schwab (3:47)

But in the end, it's all a wash, says Stephanie Kelton, an economist at Stony Brook University.

Stephanie Kelton (3:53)

Either way, you got a three on the other side of the decimal point.

Kristen Schwab (3:57)

3.4 percent. And Gary Schlossberg, global strategist at Wells Fargo Investment Institute, says that number was lower than it would have been otherwise. Because in August, the Bureau of Labor Statistics changed the way some categories like computer software and investment services are calculated.

Gary Schlossberg (4:15)

And that was going to have the effect of lowering inflation by a couple of tenths of a percent.

Kristen Schwab (4:21)

It means by previous standards, inflation would have measured higher, around 3.6 or 3.7 percent.

Omer Sharif, president of Inflation Insights, says really, it's not the big number that worries him most. It's the little ones that make up PCE, from housing to health care.

Omer Sharif (4:40)

So more than half the basket is rising at inflation rate of 3 percent or higher.

Kristen Schwab (4:46)

Numbers that he says aren't likely to fall, even if the war with Iran ends tomorrow.