Thursday, May 15, 2008

Inflation down?

Watch the puzzled looks on people's faces. Bernanke drops rates and inflation drops.

The year-on-year increase in consumer prices was 3.9 per cent, down from 4.0 per cent in March despite registering the fastest gain in food prices in 18 years. Core inflation, which strips out volatile food and energy prices and which is used by the Fed to guide interest rate policy, was 2.3 per cent in April.

The month-on-month increase in headline inflation was 0.2 per cent, when economists had an average forecast of 0.3 per cent, but a row broke out almost immediately over the accuracy of the figures.

Of course the drop is so small, and so "first time" that I write it off to "statistical noise". But the fact that it is "not increasing" is quite remarkable. I also love watching blogs this morning with people who actually professionally know a lot about the economy and important things like that run around like headless chickens. Priceless, literally.


Roy Russo said...

This has always been an enigma... how does the rising price of petrol NOT lead to inflation. For decades, I've heard economists disagree on the impact on inflation by fuel costs.

I don't get it... and my professors never did seem to explain it properly either.

I would assume high fuel costs lead to higher prices lead to lower consumption - having an equilibrium effect?

Marcf said...

It is just an argument of volatility. However recently the argument goes: if it always goes up how can it be volatile?

Anonymous said...

The FED is a bunch of crooks.