LOVINGSTON, VIRGINIA – Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation…
See, if you want to whip inflation now, you don’t need to do any of the really difficult things, such as printing less money… or God forbid, return to honest, market-chosen money (shudder!). All you need is intelligent nutrition! Image credit: Marshall Astor
Bloomberg has the report:
The U.S. cost of living increased in January by the most since February 2013, led by higher costs for gasoline and other goods and services that indicate inflation is gathering momentum. The consumer-price index rose a larger-than-forecast 0.6% after a 0.3% gain in December, Labor Department figures showed Wednesday. Compared with the same month last year, costs paid by Americans for goods and services rose 2.5%, the most since March 2012.
French investment bank Natixis makes a related observation:
The return of inflation in the euro zone with the rise in the oil price will drive the European Central Bank to give up QE […] Our estimate is that an end to QE would raise interest rates by 110 basis points.
Wait – inflation is what the Fed has been looking for. And the latest numbers reveal it may have already reached the Fed’s target of 2%. If you’ll recall, the Fed set itself two targets: Unemployment would have to fall below 5%. And inflation would have to rise above 2%. Reaching those two targets would prove that the economy was healthy enough to allow the Fed to raise rates.
Higher rates of inflation – higher prices – signal more consumer demand. And more labor demand, too. It suggests there are more people with more money ready to spend it. How could that ever be a bad thing?
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