Inflation at Lowest Rate in Four Years

The gold market has been telling us the truth — real interest rates are too high. Despite the Fed keeping nominal short-term rates at 0%, prices have been falling recently which means that real interest rates have been positive. As my gold model suggests, that leads to a lower price for gold which is exactly what’s been happening.

Today’s report on consumer prices for November from the Labor Department said that prices fell 0.3% last month.

Economists polled by Reuters had expected consumer prices to fall 0.2 percent.

The so-called core C.P.I., which excludes food and energy prices, edged up 0.1 percent after rising 0.2 percent in October. Although food prices rose 0.2 percent in a lagged response to the summer drought, price pressures remain tame.

Going by the seasonally adjusted rate, this is the biggest drop in four years.

Posted by on December 14th, 2012 at 11:30 am

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