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Does The CPI Report Support The Fed's QE2?

Thursday, November 18, 2010 - 7:41 AM
From yesterday's CPI summary from the government:
Over the last 12 months, the index for all items less food and energy has risen 0.6 percent, the smallest 12-month increase in the history of the index, which dates to 1957.

As this WSJ MarketBeat blog describes, yesterday's CPI data supports the Fed's QE2:
In short, the Fed was right to warm up the electronic printing presses, as falling prices - a problem we don’t have a clear solution to — are a much bigger risk than an uncontrollable jump in prices. (Which, we do know how to deal with. Just ask Paul Volcker.)

If you have doubts about how the government measures inflation, you should be interested in this Seeking Alpha article, Why the CPI Is Understating Inflation:
If there is any deflation out there, it can be found mainly in the energy and housing sectors, both of which experienced a huge runup in price in the years prior to 2008. In my book, that's not deflation, it's pay-back. Almost anywhere else you look, prices are rising.

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Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
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