August 31, 2013
ONE OF THE REASONS THEY CAN'T STABILIZE PRICES...:
Low Inflation Complicates Fed's Decision (JOSH MITCHELL, 8/31/13, WSJ)
Compared with a year earlier, overall prices were up 1.4% while core prices rose 1.2%. The report is the last reading of this inflation measure before the Fed's Sept. 17-18 meeting, where officials are expected to consider reducing the central bank's $ 85 billion-a-month bond-buying program. The bond-buying is aimed at boosting economic growth by lowering long-term interest rates, which the Fed hopes will spur spending, hiring and investment.The Fed's bond-buying and its promises to keep short-term interest rates low for a long time reflect discomfort that it is failing on both prongs of its mandate-to aim for maximum employment and stable prices, which it defines as inflation of about 2 %. A decision to begin scaling back the extraordinary monetary stimulus will be based on Fed officials' near-term forecasts for growth, jobs and inflation as well as their assessment of the risks the economy confronts.
...is that we remain above maximum employment. Prices will keep falling as we shed ever more make-work jobs. It's a deflationary epoch, the Fed just needs to monitor it and try to make sure it remains a healthy one.Posted by Orrin Judd at August 31, 2013 10:08 AM