The customer price index doesn’t seem to have moved much in a while as shown in data lately released. For months on end, prices of goods and services have remained basically flat. Instant cash isn’t needed to make the usual purchase for numerous. For a long time, the price index has been at about zero for the part and parcel for a federal interest rate. Deflation is generally seen when A rate of interest is at a steady low rate for too long.
Low consumer prices
The Department of Commerce makes sure to know how much goods and services are costing, and the rise and fall of that price. This is called the Consumer Price Index. The brand new York Times reports that a .3 percent rise happened for the CPI in both July and August. Many thought there were only a couple reasons the number would rise. Numerous thought it was energy and food rates rising. Consumer prices haven’t changed at all except for those two goods. Cost of goods and services is tied to demand, and with joblessness as high as it is, hardly anyone is willing to spend much. Retailers are getting less payday money for sure.
Interest rates lower than ever
For about four months, federal rates of interest have been at about zero when customer rates don’t change. The interest rate set by the Federal Reserve is the interest rate charged to banks when they borrow cash or lend short term installment loans to other banks. Loan credit is the purpose of these loans. More are borrowing with such low rates of interest. A catch is always present with things like this. Seems like too good to be true. When banks do not want to lend, it means much less economic activity is taking place. Since hardly any cash is getting used, money begins losing a lot of value. Deflation is what this is considered.
Federal rates being so low is hurting
Suppliers may have to raise the rates if deflation begins to happen to stay in business. Wages won’t go up with this, unfortunately.
NY Times
nytimes.com/2010/09/18/business/economy/18econ.html?src=busln
