When the Fed starts raising interest rates you do begin to see a pullback in the used car market. Demand for used cars begins to wane and that makes some amount of sense because if you think about it used car buyers are fairly price sensitive. We've seen wholesale prices start to nosedive which is exactly what you would expect. Less demand more supply lower prices. But you've seen consumer prices basically hold the line.
In the struggle to control inflation, the Federal Reserve has raised interest rates five times already this year.
But those efforts can be blunted if companies keep raising prices regardless. And one industry has illustrated that difficulty particularly starkly: the car market.
Guest: Jeanna Smialek, a federal reserve and economy reporter for The New York Times.
Background reading:
- Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market.
- Inflation stayed far above the Federal Reserve’s goal in August, as prices climbed more quickly than economists expected.
For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.