One of the many differences between the Federal Reserve and the rest of us concerns inflation. Look at today’s consumer price report, and we’re talking real money in terms of cost increases being absorbed by Americans at the gas pump and the grocery store. The pinch is worsened by flat wages for many, and millions who are unemployed.
On the other hand, these are the volatile elements outside the “core” inflation that matters most to Fed policy. Here, inflation is low so far. Some inflation is necessary in a growing economy, and the CPI is coming back from very low baselines in the Great Recession. The question we can’t yet answer: Whether the Fed’s unprecedented campaign to add money to the system in an effort to combat deflation and help the economy will come back as runaway inflation?
The effect of the hot money flowing out of quantitative easing is not to be discounted, especially in the market casinos and faster-growing economies such a China. Still, Americans don’t have many unions pushing for pay increases, for a fair share of record profits as happened in the 1960s. Now the average American is just happy to have a job. My inflation meter says “calm,” barring a shock, especially with oil. Click to the “continue reading” link and tell readers what you think.
Today’s Econ Haiku:
The Euro crisis
Might not be put to bed yet
The PIGS are squealing