The Fed’s Thanksgiving Turkey

Today on TAP: Misleading reports on the rising cost of dinner are feeding the Fed’s appetite for more perverse rate hikes.

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The American Farm Bureau Federation is out with a report supposedly showing how much more U.S. families will pay for their Thanksgiving dinner this year. The headline number is scary—20 percent more than last year—enough to make the Federal Reserve keep tightening the money screws. Turkeys are the biggest source of the increase, with posted retail prices up 24 percent.

But if you take a closer look, it’s a very different story. By the middle of next week, when most people actually buy turkeys, the Farm Bureau admits, supply and demand will cause prices to drop dramatically. Posted turkey prices have already dropped by 14 percent since the Farm Bureau’s survey, according to the USDA. The Ag Department says final retail prices of turkeys will be only about 1 percent higher than at last Thanksgiving.

The Farm Bureau’s own economist Veronica Nigh told CNN, “Taking turkey out of the basket of foods reveals a 6.6% price increase compared to last year.” In other words, the scary inflation hardship at Thanksgiving is mostly a headline-grabbing myth.

More from Robert Kuttner

And how exactly do the Fed’s policies of ever-higher interest rates lower the price of food? Grains are in tight worldwide supply mainly because of Russia’s war on Ukraine. Supply chain problems, says the Farm Bureau, are a major source of higher retail food prices.

Meanwhile, inflation is slowly subsiding as supply bottlenecks ease. There was good news this week. A key indicator, the producer price index, rose at a lower rate than expected in a Bureau of Labor Statistics release that got little press attention.

Little of the diminished price pressure is the result of the Fed’s higher interest rates, which do not influence supply bottlenecks. To the extent that higher rates do slow the economy, they do not work overnight, and it is insane economics for the Fed to keep compounding the damage as prices moderate on their own.

Public opinion is now so inured to the inevitability of still higher rates that widespread reports that the Fed’s expected rate hike in early December will “only” be half a point, rather than the three-quarter-point hikes of recent months, passes for good news.

The Fed’s inflation policy is a turkey. It’s time to stuff it.

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