EScroogeJr (< 20)

Don't fuel inflationary expectations, Kohn says.

June 11, 2008 – Comments (4)

Let me also contribute my 5 cents worth of kerosene. Meat inflation has yet to kick in. When grain went up, farmers began to slaughter animals, driving meat prices still lower, which made raising animals even less profitable, which caused them to slaughter some more, etc. This is obviously not sustainable. When they have slaughtered the last chicken and the last cow, the agflation will start for real. Meat is a crucial component in Americans' diet, more important than grain. By the way, the BLS's standard advise to consumers - eat chicken instead of beaf, hamburger instead of chicken, etc. - does not work when the prices of beaf, chicken and hamburgers rise unifirmly across the board.

http://biz.yahoo.com/rb/080611/centralbankers_inflation_fed.html 

WASHINGTON (Reuters) - A steady rise in energy prices has fueled an inflationary psychology in the United States and could be a problem if it does not reverse, Federal Reserve Vice Chairman Donald Kohn said on Wednesday.

"Repeated increases in energy prices and their effect on overall inflation have contributed to a rise in the year- ahead inflation expectation of households," Kohn said in remarks prepared for delivery to a conference organized by the Boston Federal Reserve Bank in Chatham, Mass.

Kohn said evidence that longer-term inflation expectations have edged up is a particular worry.

"Any tendency for these longer-term inflation expectations to drift higher or even fail to reverse over time would have troublesome implications for the outlook for inflation," he said.