
Inflation is defined as an increase in the price of a basket of goods and services that is representative of the economy of a whole. It is an upward movement in the average level of prices. Let's talk more on a current economic basis though; what is that state of the inflation level of our economy? It is a highly debated topic right now that has been heated up even more by the recent Federal Reserve monetary policy statement from this past Wednesday. ![]()
The culprit is this line from the statement "The Committee expects inflation to moderate in coming quarters." The financial news networks were buzzing over that comment from the Fed the rest of the week, with plenty of guests showing the level of food inflation that has taken place already and talking about the energy price issue which has just turned into a circus.
The most interesting thing about this kind of inflation that seems to be taking a base in our economy right now is that it doesn't take an economic scholar to see it. The price of milk, wheat, corn, beans, rice, juices are just a few of the many examples of food prices that have skyrocketed in recent months. When the average price for unleaded gasoline is over $3.50 and food prices are heating up as fast as the weather, that seems like fertile ground for some pretty significant inflation.
The Federal Reserve has had a very difficult job over the last few months as the apparent recession has been underway with the credit crunch and the housing market meltdown. I think it has made a lot of sense to cut interest rates aggressively as they have done. My point now is that I wouldn't be shocked to see the Fed raising rates within the next few quarters to try to stave off what could be some fairly significant economic inflation problems. The Fed has done a good job acting to boost the economy, but it is kidding itself if it expects inflation rates to moderate in the near future.






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