Inflation is finally gaining a little traction as recent reports begin to hint at increases. From a wholesale level it is up 2.2% in the last 12 months. Wholesalers are not always able to pass along the increases to retailers and thus to the consumer, but they make every effort to do so. In February the rate was up .3% mostly due to the cost of services. Our economy is dominated by consumer services.
The CPI and the PCE, the Fed’s preferred gauge of inflation are also on the rise in recent months. This means, in conjunction with more jobs, the Fed has every reason to raise interest rates.
Higher inflation is not a bad thing, in fact slow, steady inflation, in and of itself may not be good; at least everyone in the U.S. economy is accustomed to it and adjusts for it. It is a far easier problem to deal with than deflation.
