Prestige Economics: Harvey Could Upset Fed’s Inflation Calculations

The Federal Reserve is on the verge of implementing critical policy changes, but Hurricane Harvey could make the data signals harder to read by sending growth lower and inflation, along with gasoline prices, temporarily higher.

Before Harvey, the Fed was facing below-target inflation against the backdrop of a greatly improved labor market. The health of the labor market is likely to be reaffirmed in the August employment report issued today.

Yet the report for September, which will be released on Oct. 6, could show some negative impacts from the disruption caused by the storm. The magnitude of these negative impacts will depend on how long it takes for the Houston economy to get back on its feet.

One of the most immediate and visible impacts of the hurricane has been the rise in gasoline prices. NYMEX gasoline contract prices have spiked on fundamental supply concerns, and technicals have exacerbated the



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