Friday, September 17, 2010

Inflation or Deflation

Does it seem like prices have been increasing over the last year. Well the have been, but we're not going to call it inflation. Recent inflation data show prices have increased at annualized rate of 1.1%. This is a fairly low number and could further push the economy into decline. Despite modest inflation in what we call the core CPI overall prices rose 4.4%. This number includes energy and food prices. We normally strip away these food and energy because they are highly volatile and don't paint an accurate picture of prices. In the last few years we had oil prices spike due to speculative trading, this summer wheat prices have spiked due to the first in Russia, and other commodities (coffee for example) are rising in response.

The Federal Reserve does not worry about rising energy and food prices simply because these are outside of their control.

1 comment:

  1. One got to be very careful with all these inflation things; it can be very risky if we are not careful with how we go about doing things. I always play it safe and it helps with broker like OctaFX, as they are all very special with having small spreads from 0.1 pips to high leverage up to 1.500 while there are also rebate program where I get 50% back on all trades, so it all makes trading ever so like able and easy to do for me in every way.