The third week of the month is often called "Inflation Week," because we get data on both the Producer Price Index (PPI) and Consumer Price Index (CPI). Wednesday is PPI-Day, and Thursday is CPI-Day.
This morning, we learned that producer prices actually fell 0.1% last month, while core prices were up 0.3%, the highest since July. The first number was a little weaker than expected, while the core looked a little hot. But, overall, inflation looks pretty sanguine right now. For last year, PPI rose 4.8%, which is high, but it has been trending down. Tomorrow's CPI is expected to be up, by a mere 0.1% as well.
What this tells me is that the Fed was right in being so scared of deflation two years ago. They embarked on a quantitative easing program on a scale that would have produced serious inflation in normal times. Deflation is much more self-reinforcing than inflation, which makes it much harder to control.
Frankly, I was hoping to see more inflation. That is one way to manage our debt burden. We can pay off the debt, grow out of it, or inflate it away. Right now, we are not really doing any of these . . . just adding to it.
This morning, we learned that producer prices actually fell 0.1% last month, while core prices were up 0.3%, the highest since July. The first number was a little weaker than expected, while the core looked a little hot. But, overall, inflation looks pretty sanguine right now. For last year, PPI rose 4.8%, which is high, but it has been trending down. Tomorrow's CPI is expected to be up, by a mere 0.1% as well.
What this tells me is that the Fed was right in being so scared of deflation two years ago. They embarked on a quantitative easing program on a scale that would have produced serious inflation in normal times. Deflation is much more self-reinforcing than inflation, which makes it much harder to control.
Frankly, I was hoping to see more inflation. That is one way to manage our debt burden. We can pay off the debt, grow out of it, or inflate it away. Right now, we are not really doing any of these . . . just adding to it.
