Data was shown that says the consumer price index has been almost the very same for too long. There are many months that prices have been flat on all goods and services. It does not require just a little instant cash to purchase the normal food. Part and parcel to the price index has been a near zero federal interest rate. The concern of deflation is out there right now. This is mostly because signs of deflation are interest rates staying low and steady, as they are now.
Low consumer prices
The Department of Commerce tracks the rise or fall of prices of goods and services, called the Consumer Price Index. August and July showed rises within the CPI, reports the brand new York Times. Both months raised by .3 percent. The rise was attributed to prices of food and energy rising. Those two good are all that have changed. Everything else in customer prices seems to have stayed put. Demand and cost connect together, and since nobody is demanding with so much joblessness, costs do not move. Retailers aren’t benefiting. They’re getting fewer customers and much less payday cash.
Cannot beat the low interest rates
More is happening than just standstill consumer prices. There has also been an interest rate at about zero for four months on federal interest rates. When banks borrow or lend to other banks, the rate of interest the Federal Reserve set is what banks have to use. Usually these loans are used for loan credit. Keeping the rates low means more borrowing. There is a catch. Many banks do not want to lend. That means the economic activity is no longer happening. The value of goes down this way. This is because cash just is not being used. That is called deflation.
Federal rates being so low is hurting
Numerous businesses have to start considering what to do with deflation. Rates could have to go up with the value of goods going down. The real problem with all this is the wages. Wages aren’t going to go up still.
Further reading
NY Times
nytimes.com/2010/09/18/business/economy/18econ.html?src=busln
