Today's news on producer prices is definitely bad.
This comes on top of last week's disappointing CPI data.
There is a substantial time lag between what happens in the economy and inflation, so we're really seeing the economic strength of last spring in the data here. There's reasonable hope for inflation not worsening in the coming months.
However, the Fed's stimulus, starting last August, will push inflation up some time next year. I'm increasingly fearful that the Fed has lost control; that they will swing between over-correcting with stimulus, to over-correcting with contraction. If that fear is realized, look for a far more cyclical economy than we have enjoyed the last 25 years.
Bill, looking at some of the US economic indicators the past two years, quite a few have changed fundamentally (trend or volatility) following the Bernanke take-over. Would there be any reason to expect this is a desired result of intentional lever-pulling? Or are you, as you suggest in this blog entry, just having doubts about the maturity of the fed leadership?
Posted by: Bob Wells | March 10, 2008 at 03:53 PM