Bernanke speaks

Bernanke said that while the economy is growing, “job growth remains relatively weak and the unemployment rate is still high.” FOMC members “see inflation remaining low” but says “since summer we have seen significant increases in some highly visible prices” but because he loves the core rate and needs to further substantiate his current policies, he said “the rate of pass thru from commodity price increases to broad indexes of US consumer prices has been quite low in recent decades, partly reflecting the relatively small weight of materials inputs in total production costs as well as the stability of longer term inflation expectations.” He went on to say the rise in commodity prices is being offset by stability in unit labor costs. “Thus, the most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in CPI.” I disagree.

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