Prices and the Economy

Low inflation may seem like good news…

But, it has a darker side.

This week, Craig Siminski, of CMS Retirement Income Planning, helps us see which factors might be driving down inflation in the United States:

The Federal Open Market Committee raises or lowers interest rates to help keep inflation near a 2% target, which is the rate believed to be consistent with the Federal Reserve’s dual mandate to seek stable prices and maximum employment.

According to the personal consumption expenditures (PCE) price index — the Fed’s preferred inflation gauge — core prices (excluding food and energy) rose just 1.6% year-over-year in June 2019, even though the unemployment rate was sitting near 50-year lows (3.7%).

In the past, tight labor markets have paved the way to higher wages and inflation. The last time unemployment was close to today’s levels (3.5% in late 1969), overall inflation was running closer to 6.0% and housing costs were rising even faster.

Low inflation may seem like good news, especially for cash-strapped consumers and retirees living on fixed incomes, but…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 21 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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