It’s Back… Inflation Threatens Economic Growth
By George Anderson
The most obvious and immediate sign that goods and services were getting more expensive came at the gas pump. But now consumers are finding a whole host of items carrying a higher price tag and most signs point to even more increases in the months ahead.
“Inflation is starting to gather momentum, and I don’t see any reason to believe it’s going to reverse this upward trend,” said Richard Yamarone, chief economist at Argus Research Corp
Last month, according to the Labor Department, consumer prices rose 0.6 percent. To date, 2006 has been the worst year for increasing consumer prices since 1990. Projected at the current rate, inflation for the year would be up 5.1 percent in the U.S.
The continuing rise in prices, say some economists, increases the likelihood that the Federal Reserve will need to continue raising the cost of borrowing money to keep inflation in check.
Lincoln Anderson, chief investment officer at LPL Financial Services, told USA Today, “The fear is there is a big inflation surge ahead of us, and the Fed has a lot more tightening ahead of us. The question isn’t will they have to raise rates another quarter point or half point, but whether they will have to go a full percentage point or two percentage points.”
The U.S. is not the only country dealing with rising prices. The European Union reported that member nations saw consumer prices rise 0.7 percent in April. Speculation overseas is that the European Central Bank will need to raise interest rates when it meets in June.
Moderator’s Comment: How will continued increases in consumer prices and the rate charged by banks to borrow money affect retailing businesses?
– George Anderson – Moderator
- Inflation Anxiety Hammers Markets – USA Today
- Consumer prices on pace for 5.1% jump – The Associated Press/Bloomberg News/Chicago
- April euro zone inflation
rise spells ECB June hike – Reuters