Fed Chair Bernanke thinking hard about inflation Photo:Chip Somodevilla /Getty Images
The core CPI, which excludes food and energy, was 2.3%. This is the inflation rate that is watched by the FOMC when it decides at its monthly meetings whether to raise the Fed Funds Rate. Since April 2006, core inflation has remained within the 2.2 - 2.3% range, higher than the unofficial targeted inflation rate of 2%. This could hamper the Fed's ability to lower interest rates any further. (Source: Remarks by Governor Ben S. Bernanke, October 17, 2003; BLS Consumer Price Index: November 2007)
What It Means to You
Another way to look at this is that inflation is currently at 4.3% By using the nifty BLS inflation calculator, you will find that this means that it is as if something that cost $100 last year now costs $104.30. It also means you need a 4.3% raise just to stay even.If core inflation increases, the Fed may not be able to prevent a worsening of the Banking Liquidity Crisis.
Comments