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The government reported that consumer prices jumped 0.5% in July. But the “core rate,” which excludes volatile food and energy prices, was up just 0.1%. I think this is more evidence that inflation is not a problem.

For the last year, consumer inflation has been just 3.2%, and core inflation has been 2.1%. This means that in real terms, the Federal Reserve had interest rates slightly negative. They were handing out money for free. As Fed likes to point out, they’re not raising rates, they’re removing accommodation.

Despite the rise in oil prices, inflation has not reached the consumer level, and I don't suspect it will.

Posted by edelfenbein at August 16, 2005 12:14 PM