#MacroFriday: Wake-Up Call: Inflation

 

Who else is winding down this beautiful Friday with the rich aroma of roasted coffee beans and a final caffeine boost to push through the last hours of the day? Enjoy it a little more than usual while reading this, because your coffee just got a lot more expensive.

Brazilian weather conditions matter a great deal, since Brazil is the largest producer and exporter of Arabica coffee, and they can result in large price swings. Unfavorable dry weather and low crop yields, combined with continued strong demand for coffee, have driven prices sharply higher. Since the beginning of last year, the price of a pound of Arabica coffee has nearly doubled. On top of that, the 50% tariff on Brazilian imports in the US is slowly making its way to American (coffee) consumers. The price of coffee, as captured by the surveys used to calculate consumer price inflation (CPI), rose by 20.8% compared to one year ago.

To finish things up, let me add some sugar to the black coffee: coffee bean prices have dropped sharply in recent days due to much-needed rains in Brazil, a possible exemption from US tariffs on Brazilian coffee beans, and a scheduled meeting next week between US president Trump and Brazilian president Lula… over coffee?