Home Daily Blitz Why Yellen, Fed May Be Heartened By CPI Data

Why Yellen, Fed May Be Heartened By CPI Data


marketwatchThe following is an excerpt from Greg Robb | February 19, 2016 | marketwatch.com |

WASHINGTON (MarketWatch) — Federal Reserve Chairwoman Janet Yellen will be heartened by the surprise jump in the core consumer price index as it confirms what she told Congress last week that prices would rise over the medium term.

The data “validates the Fed’s view that inflation is alive and kicking” said Omair Sharif, economist at SG Americas Securities in New York.

Core prices are up 2.2% over the past 12 months, the biggest increase since the summer of 2012.

See more: Inflation flat in January but some price pressure on consumers is building

Although too much inflation is viewed as dangerous for the economy, Fed officials think that a 2% inflation rate is best for the economy to grow.

Inflation has been trending below that target for the past four years. Low inflation is a signal of weak demand in the economy and raises fears of actual decline in prices or deflation, which can damage an economy, especially one with high debt burdens like the United States.

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