April’s CPI Research Notes

by Jim Baird on May 19, 2010

Today’s CPI release only reinforces that consumers are feeling virtually no impact on their spending power right now.

The excessive slack in the economy, particularly in the labor market, should help to keep inflation at the consumer level in check in the near term.  Inflation may still be a bigger problem down the road, but today we see virtually no pressure on that front.

The elevated unemployment rate and uneasy consumers continue to restrain consumer spending, affording businesses limited ability to raise prices. 

Without substantial increases in employment, and a corresponding uptick in spending, we are running the risk of not only low inflation, but the potential of further disinflation.

Tha stimulus efforts by the federal government and Federal Reserve were successful in combating the disinflationary environment that in late 2008.  While the Fed continues to position itself to gradually reduce its intervention, there appears to be very little pressure on the Fed to raise interest rates in the near term.

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