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June 14, 2006

Inflation jumps

The most recent inflation measures showed all of them up significantly. N.C. State University economist Mike Walden considers the ramifications beyond the impact on consumers.

"Many economists … were waiting for this to happen, and it’s not all due to energy prices and gasoline prices," explains Dr. Walden, a professor in the Department of Agricultural and Resource Economics.

"The prices of many raw materials have been rising very rapidly. And what really got the attention of many economists and analysts is that what’s called the core inflation rate, which is really the inflation rate outside of energy and also food prices, is now rising above the kind of magic 2 percent annual rate. Two percent is thought to be the upper limit desired by the Federal Reserve.

"So this is certainly bad news on inflation, and it increases the pressure on the new Federal Reserve chairman to show that he is an inflation hawk -- meaning that he will try to reduce the rate of inflation, but the downside of that is it usually means he’s going to have to push the economy into a lower gear."

Posted by deeshore at June 14, 2006 08:18 AM