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EScroogeJr (< 20)

Party line: there's no inflation except when oil is rising



June 13, 2008 – Comments (2)

I think I know how he will resist the erosion of inflation expectations: by saying he is detrmined to resist the erosion of inflation expectations. The Fed pretends that expensive oil is the problem, and the market pretends to believe him. 

WASHINGTON (AP) -- Inflation shot up in May at the fastest pace in six months, pushed higher by soaring costs for gasoline and other types of energy.

The Labor Department reported Friday that consumer prices rose by 0.6 percent last month, the biggest one-month increase since last November, as gasoline costs surged by 5.7 percent. Food prices, which have also been rising sharply, were up 0.3 percent as the cost of beef and bakery products showed big gains.

Core inflation, which excludes energy and food, edged up a more moderate 0.2 percent in May. But even there, core prices are up 2.3 percent over the past 12 months, above the Federal Reserve's comfort zone.

The Federal Reserve, which from September through April had been aggressively cutting interest rates to fight a mounting economic slowdown, is now indicating that its biggest concern has changed from the threat of a recession to worries that inflation could get out of control.

In a speech Monday, Fed Chairman Ben Bernanke said that the Fed will "strongly resist an erosion of longer-term inflation expectations." Those comments have raised expectations that the Fed's next move later this year will be to start raising interest rates.


2 Comments – Post Your Own

#1) On June 13, 2008 at 4:13 PM, angusthermopylae (37.86) wrote:

"Core inflation, which excludes energy and food"

That's the main problem there; people are spending a lot on food and energy (droughts, floods, gas prices, etc) and it's not getting factored in.  I'm not saying that are 100% correlated, but, in my mind, those two are the biggest factors to the majority of consumers (going with the 90% to <10% population).

As you said, everyone has drunk the koolaid on this one, and are trying like hell to hold on to their happy thoughts as we sail over the edge.

(Sorry about being so negative--I think I'm pretty cheerful overall, but willful stupidity ticks me off to no end.) 

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#2) On June 13, 2008 at 4:14 PM, angusthermopylae (37.86) wrote:

sorry...hit the "Post" button just before I saw my error.  It should be "90% of the wealth owned by <10% of the population".


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