Inflation is Tame... Unless You Need to Eat or Stay Warm, Naturally

Friday, February 19, 2010 , , 1 Comments

"It's cool! We have inflation by the balls!"

Don't believe the hype, kids, we're going off of the unrealistic BLS numbers that assume human beings need not eat nor heat their homes so as long as you're okay with starving and freezing, inflation is totally under control.


Consumer prices edged higher in January, while prices excluding food and energy fell for the first time in 27 years, supporting the Federal Reserve's contention it would keep its benchmark interest rate low for an "extended period."

The tame inflation data on Friday helped calm fears that the Fed's decision to raise the discount rate it charges on emergency loans to banks, announced on Thursday, presaged a broader tightening of monetary policy.

"The Federal Reserve will be in a position to keep rates exceptionally low for an extended period of time. We expect no official change in the federal funds rate until late in the third quarter," said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts.

The Labor Department said the Consumer Price Index rose 0.2 percent last month, lifted by a spike in energy costs, after increasing 0.2 percent in December. That was below market expectations for a 0.3 percent gain.

More realistically, inflation is running a lot hotter than those "extended period" pricks might like when you add back in essentials like, oh you know, food and energy.

Kansas City Business Journal:

Rising prices for energy, transportation and housing contributed to higher Midwest prices in January.

The Midwest Consumer Price Index rose half a percent during January, representing a 2.9 percent climb from January 2009, the U.S. Bureau of Labor Statistics said Friday.

Energy prices — including motor fuel and household fuels — heated up 5.1 percent during the month and were almost 18 percent higher than in January 2009. A special aggregate index for all items except for energy was flat during the month, but up 1.5 percent from a year before.

Uhhh... it doesn't take a "Dr" before your last name to diagnose what's wrong here, does it?

Meanwhile, not sure if you heard but our friends at the Fed have dipped a tentative toe in the normalization of financial conditions pool, announcing a surprise discount rate hike on Thursday after markets closed. I'm fairly sure you all know how that went, as we all know markets don't like to hear that the crack dealer is taking away the punchbowl.

Inflation? Pffft. Don't blame them, they trimmed 27 days from primary credit loans and tweaked the discount rate, it can't possibly be their fault.

Does this news mean the deflationistas finally have their day? I wouldn't get used to it.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Yeah, that government cost of living, inflation bs goes way back to the 1980s. Same with the unemployment rate. Looking back, that was probably the beginning of the end when the government started low balling economic data, everyone knew it, and the Federales just kept on doing it. Big Brother doublespeak: bad is good, inflation is deflation, yada yada yada.