The Fed is expected to raise rates an additional quarter-point to 3 percent at its next meeting May 3.

What is Greenspan trying to prove? What is wrong with growth without inflation? My 401k would like to know.

The Fed exists exclusively to fight inflation, so it does even when there is none.

Nice chart - going high tech?

3% has historically been considered a neutral Fed Funds rate i.e. not restrictive or expansive. The forward market curve currently expects Fed Funds to get to 4% by year-end. As the graph shows the flattening curve certainly suggests that the market isn't building in much inflation expectations.

oj - It's always the case that when the Fed raises short rates, the yield curve flattens, so the slope change you see is normal. The fact that long yields fell indicates that the old Fed policies were inflationary, not that the new rates are too tight. The Fed should keep raising rates until long rates stop falling.

AWW - The declining long yields show that the market is decreasing its inflation expectations. In the absence of inflation expectations, long yields should approximate the real growth rate of the economy, 3-4%.

PJ - I agree, I just didn't phrase it well.

PJ: Agreed. All of which means the Fed would do well to let the May 3 meeting go by and leave rates unchanged while the economy digestst the last few inputs.

i guess if you eliminate enough categories you can show inflation to be as low as you want. my grocery bill is second only to my mortgage, so the inflation rate on food is very relevant to me. that said i only have a 3 mile drive to work so i am doing ok on the energy front.