by William Neikirk
Uh-oh, inflation is showing its ugly face again. And that could complicate matters for the Federal Reserve in its campaign to lower interest rates.
The closely watched consumer price index, measure of the prices of goods and services a the consumer level, went up a little more than expected in January, according to the Bureau of Labor Statistics in a report today.
The CPI increased by 0.4 percent over-all, with higher food costs leading the way. Excluding food and energy prices, however, so-called “core” consumer prices went up a slightly more modest 0.3 percent, still the strongest gain since June 2006.
Such reports do have an impact in the presidential race by keeping the economy as the No. 1 issue. Both sides, though, blame the other for bad economic news. This report will stoke the political fires some more.
Our central bank has been reducing interest rates to contain the fallout from a credit crunch that began in the sub-prime mortgage market. Next month, it is widely anticipated the Fed will slash interest rates one more time. Financial markets have already “priced in” these cuts. the stock market sank when the news was announced.
The best guess is that the Chairman Ben Bernanke’s Federal Reserve will still go ahead with another reduction in interest rates when it meets March 18. It has already decreased interest rates by 1.25 percent over its last two meetings.
Bernanke said in congressional testimony on Feb. 14 that “inflationary expectations appear to have remained reasonably well-anchored.” The Fed tends to look at the “core” rate of inflation as a guide to policy, but strong energy prices increases in the past year have forced it to give more weight to the over-all rate of inflation.
Fear of a financial crisis and a deep recession has led the Fed to make a dramatic ease in its monetary policy. And with mortgage foreclosures on the rise and fear of turmoil in financial markets rampant, it is being forced to pump more money or “liquidity” into the economy to keep credit from collapsing.
But the Fed also must watch how inflation is faring. Its general policy in the past few years has been to attack rising prices with higher interest rates. Now, as it eases and drops interest rates, it is taking a gamble that inflation will remain under control as the economy slows.
At the least, the new CPI report sent a warning that the Fed can’t look the other way on the price front. The real hope is that the jump in consumer prices will taper off in coming reports, and that everyone will be able to breathe easier.
The economy slowed in the fourth quarter of last year and many analysts say that the nation is close to, or actually in, a recession. If that’s the case, inflation is demonstrating more aggressiveness than the Fed had hoped.
The Labor Department said consumer prices rose 4.3 percent when compared with a year earlier. Energy prices climbed by 0.7 percent last month, still high but down from the 1.7 percent rise in December. But food prices soared by 0.7 percent, compared with the 0.1 percent increase in December.
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Comments
I love it when they exclude the food and gas to make the numbers look better.
Actually, as Terry will verify, I think, the rise in food and gas is not really inflation, but a supply and demand phenom.
Inflation is too many dollars chasing too few products.
Also remember; Buy low, sell high.
Posted by: C.Morris | February 20, 2008 11:22 AM
Gotta love these Republican economies.
Posted by: Paul | February 20, 2008 12:24 PM
Brace yourself for stagflation, people.
Posted by: dt | February 20, 2008 1:45 PM
Liberals should never comment on economical matters because they have no clue how an economy works.
Higher energy prices certainly are the main culprit. But so is alternative energy. The more grain-based fuel we develop, the higher food prices go. Why? Because farmers are growing more corn for ethanol creation, not for food. They aree growing less wheat and soy to grow more corn. More goes to energy, less goes for food and animal feed, which drives up food prices including meat. We are paying the price for years of neglect as this country hasn't built nuclear power plants (stopped largely due to liberals), oil refineries (stopped largely due to liberals), no oil and gas exploration (stopped largely due to liberals), no coal (stopped largely due to liberals). See a common refrain here?
Posted by: John D | February 20, 2008 2:04 PM
"BUSH / CHENEY QUAGMIRE AUGMENTATED ECONOMIC PLAN CONTINUES TO DRAG THE AMERICAN PEOPLE BACK TO THE BRINK OF "BROTHA CAN YOU SPARE A DIME"
AS AMERICA AWAITS "MADAME SPEAKER" TO RETURN TO THE DARKEN HALLS OF THE WHITE HOUSE, TO TAKE ON THE TWO SLEEPING GIANTS; THE BOEHNER AND THE BLUNT OF THE GOP.
AS AMERICA ENJOYS IT'S LONG AWAITED "PRIVACY" AND IMMUNITY FROM PROSECUTION AND LIABILITY WHILE TALKING ON "UNSECURED CIVILLIAN" LINES IN AMERICA.
AS AMERICA AWAITS "GLENN BECK SPEAKS" COMMARADS, THE GOVERNMENT IS ALWAYS THE SOLUTION.
ONLY WHEN BUSH/CHENEY AND HIS FIFTH REICH SAYS IT.
ONLY WHEN BUSH/CHENEY LAW CIRCUMVENTS THE CONSTITUTION TO PROTECT THEIR FREEDOMS FROM LIABILITY.
SO CONSERVATIVE CAUCASION COMMARADS, VOTE OBAMA IN THE PRIMARY AND VOTE MCCAIN IN THE GENERAL. THIS IS THE ONLY WAY TO KEEP US OUT OF JAIL AND CONSIDERED A "PHONY ACHIEVEMENT" AT BEST.
COMMARADS, I GLENN BECK SPEAKS. HEY HOW DID YA'LL LIKE HOW MY COMPANY CNN JUST DOGGED OUT OH HILLARY LAST NIGHT.
COMMARADS "THE STAKES ARE HIGH"
Posted by: Roger Morris | February 20, 2008 2:29 PM
Look at the price of oil..... passing it on to consumers.
Enough said.
Posted by: Max | February 20, 2008 2:44 PM
"
Liberals should never comment on economical matters because they have no clue how an economy works."
I see the French Mime in the invisible box is wildly gesturing again. I wonder what he is trying to say this time?
Posted by: C.Morris | February 20, 2008 3:10 PM
Another triumph for "Trickle Down Economics". Was old man Bush correct,Voodoo?
Now the professional excuse makers will rise to the occasion.
Posted by: Raving Loon | February 20, 2008 3:14 PM
C. Morris:
I read mime language - he wasn't saying anything important or rational - like always.
Liberals have no clue, Johnny D??
So who has been running the country the past 7 years?? Who had the majority in both the House and the Senate for 6 years?? Why didn't your heroes, GWB and Cheney, pass all this wonderful energy legislation that would have done all the things you said??
Face it - you Republicans will leave this country with hundreds of billions of dollars of debt owed to foreign countries. It will take the Democrats to clean up your mess - just like we did in the 90's.
Posted by: BobinATL | February 20, 2008 3:18 PM
C.M
If John d is the French mime I am happy to be his French made! I would rather be in their than out here with you people. WHy need all the clean air and water all of sudden? We never needed it befor. But we still need the money!
Paul is right to.
Posted by: Bushman | February 20, 2008 3:21 PM
Little Johnny D,
Can we store nuclear waste in your backyard? Cool thanks!
Posted by: janet | February 20, 2008 3:38 PM
Ugh, I think the time to consider investing in canadian banks is yesterday...
Posted by: Jeff | February 20, 2008 3:40 PM
"BUSH ECONOMICS HAILED"
GAS AND FOOD DOESN'T MATTER IN AN ECONOMY. THEY HAVE NO RELATION TO WHY "A HARD HEAD HAD MADE A SOFT WALLET THE PAST 7 YEARS."
GEORGE BUSH ECONOMICS IS WORKING. IT'S HARD AT WORK. IT'S WORKING HARD AT DEPLETING LIFE AS WE KNOW IT. DEPLETING YOUR INHEIRANTANCE TWO-FOLD MONTHLY. DEPLETING YOUR MOM AND DADS SAVINGS SO THAT AT END OF THE TUNNEL THEY TOO HAVE NOTHING TO GIVE. DEPLETING YOUR RESOURCES TOWARDS THE FABRICS OF LIFE, LIKE CHICKEN, BEEF, WATER IN AMERICA.
GEORGE BUSH MICROECONOMICS ARE WORKING. FORGET MACRO, THIS IS MICROECONOMICS 101 AMERICA.
I'M DOING A HECKUVA JOB, HECKUVA JOB.
WE ARE OKAY, THE MIDDLE CLASS IS JUST CRY BABIES, WANNABEE YUPPIES OF THE PAST.
SO WHAT IF WE ARE DEPLETING THEIR ENTIRE SAVINGS ON, 6% RAISE HERE, 10% SALES TAX THERE, AND A STOCK MARKET THAT "SHAKES THE TREE" EVERY FOURTH DAY.
SO WHAT.
MARTHA STEWART CAME BACK, SO CAN THEY!
Posted by: Roger Morris | February 20, 2008 4:51 PM
See a common refrain here?
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Yep. Dyslien hates people, especially people that don't think exactly like he does. Yawn.
Posted by: rncbs | February 20, 2008 5:04 PM
What does the Fed know? John D was on a full airplane last week, so the economy is just fine.
Posted by: Luke | February 20, 2008 5:24 PM
Oh, poor, poor, Johnny D. Just not enough scapegoats to go around. We let you have the reigns, you screwed the pooch. Now that it's all unraveling, you're not man enough to admit Bush's policies were misguided. That's o.k., we really don't give a sh!# what you think. The voters know who's to blame, and the voters will respond with a vengeance.
Posted by: dt | February 20, 2008 5:26 PM
"What does the Fed know? John D was on a full airplane last week, so the economy is just fine.
Posted by: Luke | February 20, 2008 5:24 PM"
Hilarious! I just sprayed fresh G&T all over my monitor!
Hey Bushman!
Watch your back in that glass box buddy. BTW, are you going to wear the outfit?
Posted by: C.Morris | February 20, 2008 5:52 PM
"Hilarious! I just sprayed fresh G&T all over my monitor!"
Thats a good laddie!
haha
Erick
Posted by: erick | February 20, 2008 8:30 PM
CM - at least you know where to get your economic advice.
Paul - over six years of economic growth, low inflation, low unemployment and low interest rates. It's called an economic cycle, they come to an end - remember 2000.
Bobin - funny how you bring up Congress and who has been running it 6 of the past 7 years. The GOP had the first six, the dems this past year.
Not that I am stating any cause and effect, but when did the economy start going south - after the dems took control of Congress.
Posted by: Terry | February 20, 2008 8:32 PM
Ahhh, the blithering idiots that are the Loony Left.
Bobin, the reason no energy legislation was passed in the five years Bush and the GOP ruled was because YOUR party employed filibuster tactics.
Dumb Dumb Janet, let's put the nuclear waste in your backyard or your closets. Either is fine by me.
I love it, though. You morons moan and groan about the high cost of energy, but you're against anything that gets energy!
And, finally, William Neikirk must be quaking in his pants over the thoughts of a recession. After all, he's been hoping for one for seven years now. The thought of a recession is like Viagra to Neikirk. Viva, recession!, he sings!
Posted by: John D | February 20, 2008 8:38 PM
Well Terry, even though I disagree with your politics, opinions, etc. I know that people in general possess some good knowledge, if we can just extract that useful portion from them.
Still looking at Crazy John Devola, however.
Posted by: C.Morris | February 20, 2008 9:14 PM
Does the federal reserve work for private banks, or for America? I will not give the fed. res. the honor of capitalizing its name. Just came back from Canada again today--continued lower American dollar. BushCo and the fed have made Americans look like a bunch of losers. A real chimp and an abolished fed. res. could not have done a worse job with the American dollar.
Posted by: Vivian | February 20, 2008 9:43 PM
Is it time for some 'Nixon style' wage and price controls? Just going on memory, I believe the war inflation crisis that The Trickster used to justify the W/P freeze was about 4.3%.
Posted by: C.Morris | February 21, 2008 10:55 AM
the reason no energy legislation was passed in the five years Bush and the GOP ruled was because YOUR party employed filibuster tactics.
Posted by: John D | February 20, 2008 8:38 PM
You mean the filibuster tactics were employed by Democrats and a handful of Republicans including your parties Presidential nominee John McCain. Sorry to bring facts and perspective to the equation.
Posted by: john | February 21, 2008 11:29 AM
CM - you are kidding on the price controls, correct?
Here's a sad thing, 25 post on this economic topic, 366 posts on Obama's snot.
Posted by: Terry | February 21, 2008 10:47 PM
It’s true that the democrats of today are spineless wimps because they talk the Leftist rhetoric and then once in office they vote with the republicans. But the philosophical standpoint of true people of courage will hold the corporations accountable. Americans have sadly bought into the propaganda that a free and completely unregulated market will somehow be better for everyone. This is very naïve considering how we have seen what corporate greed and corruption does in the endless cases of the top executives cashing in their stock, lying to everyone else about the accounting, and then getting off scott free with the loot. Talk about robber barrons. Is this the wild west or what! And all the while corporations continue to slash benefits while requiring more hours worked for less wages, literally squeezing the life out of the working classes.
Posted by: Bobby | February 24, 2008 8:46 PM