Friday, August 8, 2008

Inflation, Revisited

Earlier, I wrote an article about how "core inflation" numbers understate real inflation. See

T. Rowe Price just published an article in the "T Rowe Price Report" supporting my argument that "core" inflation is a fallacious statistic. See Alan Levenson, "Food, Energy Costs Spur Inflation Fears." No link available, as far as I can see right now, but here are some snippets:

Indeed, the CPI posted a year-to-year inflation rate of 4.9% in contrast, inflation in the so-called "core" CPI, which excludes food and energy, was [recorded as only] 2.4%...higher inflation will become the most potent threat to growth.

In other words, "core" CPI is not accurate, as I explained earlier.

An interesting tidbit: Mr. Levenson said in 2007 he believes the Fed Reserve will keep rates steady all year; however, it sounds like the Fed needs to raise rates to combat inflation.

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