Bloomberg: Why Inflation Is Not a Problem (Yet)

Why to Keep Your Inflation Anxiety in Check
Yes, prices are rising faster, but all signs suggest it won’t amount to much.
Bloomberg, June 18, 2018

 

 

For those feeling the vague pangs of inflation anxiety — nothing special, just the plain-old-run-of-the-mill cost of living price increases — this one is for you.

This week’s Consumer Price Index Summary showed signs that rent, health care, but most of all energy prices are rising. Year-over-year, the index increased by 2.8 percent, the fastest pace in six years as the following chart shows:

The key question is whether inflation becoming a problem that will force the Federal Reserve to act above and beyond the plan it has more or less laid out? “Not yet, but” is a fair answer, given this week’s Federal Open Market Committee statement. It notably did not contain a sentence that had been a regular part of its communications for what seems like years: “The Committee expects that economic conditions will evolve in a manner that will warrant additional gradual increases in the federal funds rate” (emphasis added), with “gradual” the key word in that sentence.

In other words, the Fed just put markets on notice that it stands ready to hike rates higher and faster than it had been previously discussing. However, recent trends imply the Fed isn’t behind the curve when it comes to inflation . . .

 

Continues at: Why to Keep Your Inflation Anxiety in Check

 

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