The Family Firm Blog

Inflation Continues To Be Low

Posted by Nate Gendelman on 6/16/17 1:15 PM
Nate Gendelman

Inflation continues to be low...and rather than strengthening, it is actually weakening.

Perhaps the Fed is right that low unemployment will generate inflation, emphasis on WILL...but to date, no. Wrong. Inflation stubbornly refuses to rise about 2%, their professed target level.

Interesting to note which components are bringing about the price deceleration: Used car prices are tumbling; medical inflation has fallen and is now increasing at less than 3%. Even the cost of education is rising at "only" a 2% rate these days. Also interesting to note that despite the Fed's optimistic statement and intimations of interest rate increases to come, bond prices ROSE, not fell. And the dollar fell to levels not seen since October.

 So....perhaps the Fed is right that higher inflation and rates are imminent...nevertheless, the market continues to say No....and so far the economic statistics are voting for the wisdom of the market.