With burgers down and beer up, the cost to host yesterday’s Memorial Day BBQ was approximately the same as last year.
Where are we going? To inflation and the Fed.
At $229.39, a 20-item traditional Memorial Day picnic for 12 people would have cost you just $.57 more than last year.
Having dropped by 10%, the price of ground beef offset other increases. The reason? After a 2014 drought nudged beef prices upward, ranchers had the incentive to produce more beef. That supply boost paired with a slight increase in demand pushed price downward.
You can see below that although the price of ground beef declined, it remains substantially above pre-2011 lows:
Further constraining the price of a BBQ food basket, your hot dogs (-2%), chicken (-7%) and buns (-3%) were also cheaper than last year. However, most of the other items–the cheese, coleslaw, ketchup…and most of the shopping list–were relatively unchanged except for the beer. Two 24 packs of Bud were up by 4%.
Our Bottom Line: Fed Rate Hike
Close to zero, the line showing the fed funds rate (bank to bank lending rate) since the end of 2009 is almost invisible:
To imagine what they might have been thinking, we can think of a car and driver. If the car is the economy and the driver is the Fed, then moving along a flat rural unwinding road, it can see far ahead and brake gradually wth higher rates when inflation appears in the distance.
The road though is not flat. Because it is steep, winding and muddy, the driver has a tough time seeing what lies ahead.
“What, then, should the driver do? Don’t drive too fast, of course, but don’t drive too slowly either. ‘Be careful to preserve momentum and be mindful that the accelerator will be useless if the car gets stuck in the mud,'”
The price of our Memorial Day BBQ is just one marker along that winding road.