Low Inflation Complicates Fed Plans
Posted at 4:15 p.m. on June 28
“Inflation is running well below the Fed’s 2% target. Thursday’s reading on the Fed’s favorite inflation gauge showed prices up just 1.1% in May from a year earlier, matching the lowest pace on record,” the Wall Street Journal reports.
“Fed Chairman Ben Bernanke and other central bank officials maintain it’ll pick up. But a substantial band of economists outside the Fed is starting to challenge Mr. Bernanke’s diagnosis… If inflation doesn’t rise close to the Fed’s target, Mr. Bernanke said the Fed might rethink its plan to begin scaling back the size of its bond-buying program later this year.”
“Medical payments are a key wild card… Declining government payrolls and tightening federal spending also could play a role in pushing inflation down.”