Inflation

Inflation, at the very core, is the rate at which the price level in an economy increases. It can also be called the rate at which the purchasing power of individuals is falling: as prices increase, less and less can be bought with each dollar. There are many factors that can cause inflation to increase, but two of the major ones are excessive money supply and reckless government spending.

Inflation is not a problem if it is low; but, once it escalates, it causes severe economic problems. To control inflation, central banks use different tools such as interest rates. In the U.S., the Federal Reserve targets inflation rate in the U.S. economy to be between two percent and three percent.

The inflation figures in the U.S. are reported by the Bureau of Labor Statistics (BLS) each month, for the previous month.

Since the financial crisis of 2008 and 2009, inflation in the U.S. economy has been very low. In 2013, prices increased by 1.5%, which was well below the Federal Reserve’s target. But, over the past few years, the central bank has printed a significant amount of money to boost the economy. The money supply, as a result, has substantially increased. In addition to this, the U.S. government has also spent, continuing to incur budget deficits year-over-year. Going forward, this could mean soaring inflation.


Core CPI Increased in April; More Inflation to Come?

By Friday, May 22, 2015

Core CPIOn Friday, May 22, 2015, the Bureau of Labor Statistics released its report on the consumer price index (CPI) for April. The CPI increased 0.1% month-over-month in April. (Source: Bureau of Labor Statistics, May 22, 2015.)Meanwhile, the core CPI, which excludes food and energy (two of the biggest expenses), gained 0.3% in April—the. Read More

U.S. Economic Outlook for 2015: Economy Strong but Markets Unstable

By Tuesday, May 19, 2015

Economic Picture for 2015 Not RosyStrong Economic Data Points to Growth in 2015?As 2014 winds down, many investors are wondering what the economic outlook for 2015 will be. If you look at the U.S. economic data that’s been trickling in, 2015 looks like it could be a very strong year.The U.S. announced strong third-quarter gross domestic product (GDP) growth of 3.9%.. Read More

Inflation Expected to Remain Low: Why This Won’t Hold True

By Tuesday, May 12, 2015

Inflation Remain LowOn May 11, 2015, the Federal Reserve Bank of New York released its survey of consumer expectations. The results from about 1,200 respondents suggest that the expected inflation in the next few years will be soft. (Source: Federal Reserve Bank of New York, May 11, 2015.)According to the survey, the coming one-year expected inflation. Read More

Higher Interest Rates: the Good, the Bad, and the Ugly

By Tuesday, May 5, 2015

Higher Interest RatesThe U.S. Federal Reserve has kept interest rates artificially low in order to stabilize the economy downturn of 2008 and 2009. Is it about time the Federal Reserve raises interest rates? Can our economy handle it?You see, under low interest rates, consumers and firms find it easier to borrow money to finance their spending, investment,. Read More

How I Proved a Gold Bear Wrong About Gold Prices in 2015

By Thursday, March 19, 2015

Bullish gold outlookRecently, I had an interesting conversation with my friend about the current situation surrounding gold prices. He argued gold investments were a drain on your capital; I argued that gold is the next big trade.My Friend’s Bearish Gold Outlook“How can you be so bullish on gold?” asked a friend of mine I met with over the weekend.. Read More

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From: Michael Lombardi, MBA
Subject: Golden Opportunity for Stock Market Investors

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