If we don't say its name, will it go away?

Monday, February 20, 2012

Yesterday, upon the stair,

I met a man who wasn't there

He wasn't there again today

I wish, I wish he'd go away...

-- Hughes Mearns, "Antigonish"

Last week, the Labor Department reported that the consumer price index (CPI) increase 0.2% in January, signaling signs of inflation.

Economists say the increase was primarily due to higher costs for food, gas, rent and clothing. When discussing the cost of living, economists often "throw out" volitile energy and food prices to get to the core prices. After making this change, rates increased 0.2%. While medical care, rent and tobacco prices rose, airfares fell and car prices were unchanged.

The CPI was flat in December, but core inflation over the year rose 2.3%, the largest increase in three years. Some economists say that inflation is peaking and will level off. Others feel that inflation is actually higher, but firms feel they can not pass higher prices on to consumers, due to anemic demand.

Perhaps the reason that no one is buying is because after paying escalating gasoline and food bills, they simply don't have any money left.

But the Federal Reserve is forecasting that consumer price inflation will remain in check this year. It expects that the inflation gauge it follows will increase by about 1.6% in 2012. That's below the Fed's target for inflation of 2%.

Fed Chairman Ben Bernanke announced that target, the first ever for the central bank, last month. They also announced their intentions to hold its benchmark interest rate at a record low near zero until late 2014.

The economists hope that this rate stability will encourage business expansion and consumer spending.

That's the theory.

Those of us who live in the real world, where we can't "throw out" the volitile price of energy and food have a very different reality. We make the hard decisions, cut back on non essential spending and hope for better days.

It would be nice if someone in power were able to actually relate to us, grasp the problem and get to work making things better.

Perhaps it will just go away...