Mar 21, 2007

Is Inflation A Worry

Today the Federal Reserve issued their Federal Open Market Committee statement. Wall Street cheered because they dropped the possibility of a rate increase from the statement. They did indicate that the:

“…readings on core inflation have been somewhat elevated.” and “the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.”

Two of the underlying indicators, wholesale prices and factory orders, do not look positive for future inflation concerns. From Economic Slowdown Sooner Rather Than Later the January reading of factory orders showed the largest drop in 6 ½ years and as indicated in a Martin Crutsinger article on the AP, in February wholesale prices jumped 1.3%, also a negative trend for future inflation.

Many prominent economists seem to feel that these indicators are only bumps in the road to prosperity. But any slowdown could also be accelerated by ignoring these economic factors today.