Guess What’s Coming to Dinner: Inflation!
By John Butler
10/31/10 London, England – The US Bureau of Labor Statistics (BLS) recently reported that consumer price inflation (CPI) declined in September to a 59-year low of just 1.1% y/y. Excluding more volatile food and energy prices, the so-called core CPI rose only 0.8% y/y. This is not good news for the US Federal Reserve, which considers this a dangerously low rate of CPI. While the Fed lacks a formal CPI target-unlike many other central banks-it nevertheless seeks to keep inflation sufficiently above zero so that, should the economy weaken further, low inflation is unlikely to turn into outright deflation, something the Fed considers it necessary to avoid at all costs.