October 19, 2006

HAD ENOUGH?:

Inflation deflation (Peter Morici , 10/20/06, Asia Times)

Core consumer price inflation remains above Fed chief Ben Bernanke's target range of 1 to 2%. However, core consumer price inflation in recent months reflected the continuing pass-through of prior surges in energy prices to non-energy products. Those pressures are now reversing.

Slowing economic growth, moderating housing prices and falling oil and natural gas prices should relieve pressures on both the broader consumer price index and core consumer prices. Inflation should decline the remainder of this year.

With the housing and automobile sectors slowing, raising interest rates further would serve no useful purpose. The Fed should not change interest rate policy before its January meeting.

Growth should recover to about 3% by the first half of next year.

Home prices are moderating, not collapsing, and overall these have risen nearly 50% over the past five years. Falling energy prices are bolstering consumer confidence, and consumers still have considerable home equity to tap. Holiday retail sales will demonstrate unexpected strength, and along with more robust commercial construction and business investment, will pump new life into to aging economic expansion.

Posted by Orrin Judd at October 19, 2006 1:57 PM
Comments

Should the unthinkable happen, the Dems will get credit for all these wondrous economic happenings after the election and all will be right, er, I mean left, with the world.

Posted by: erp at October 20, 2006 9:58 AM
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