Low Inflation Keeps the Fed on Track

Category : Blog on October 29, 2012

The Wholesale Price Index (WPI) rose 1.1% in September. This comes after a jump of 1.7% in August and might be cause for alarm. However, core prices which exclude food and energy were unchanged in September and food prices were only slightly up at 0.2%. The main component of the rise was due to gasoline prices which rose 9.8% in September. Fuel prices are not included in the Consumer Price Index and this should therefore translate into acceptable gains in the coming CPI numbers, keeping the Feds 2% target on track. Low inflation allows the Fed to keep interest rates low which stimulates the economy and encourages job creation.

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