inflation

CPI Shows an Increase – Is Inflation Set to Go Up?

Even as the government advertises the low inflation rate as a positive development in the slowly recovering U.S. economy, the consumer price index has recorded the largest increase from the end of 2009. The Labor department recently released the CPI statistics that show a 0.2% increase that comes close on the heels of the 0.1% increase recorded in December 2009.

The Federal Reserve is still continuing with its many programs designed to instill consumer confidence and boost economic stability, in spite of the fact that increased inflation is usually associated with a recovering economy. While economists have stated that the inflation levels are not likely to drop any further, they are also being cautious about taking any stance indicating an economic turnaround. It appears that they believe the price rise is too swift to be considered the beginning of a full fledged trend. Until more time has passed, it may not become clear exactly how prices will look in the coming months. However, many economists are terming the increase as the desired outcome of the many fiscal measures that the government put in place during the recession. From this perspective, the improvement in inflation may be perceived as a measure of the success of the policies.

The increase has exceeded the expectations of economists who had predicted a 0.1 % gain. The major contribution to the current increase comes from the fact that air fare and apparel have both become costlier now. Cost of shelter has continued its upward movement for the fourth month in a row.

However, Fed President (Chicago) Charles Evans believes that with the unemployment rate still hovering at high levels, the increase in inflation does not really mean much in terms of representing economic improvement. The labor market has definitely a long way to go as is clear from the rise in unemployment wage benefit applications in recent weeks.

Taking a completely opposing view, the Fed Chief in Dallas, Richard Fisher, believes that it is time for the government to ease off with stimulus programs to ensure that no further pressure is added to prices, pushing them up. He categorically stated that he could not see any reason for further government initiatives on the same lines.

Investors do not appear to be unduly worried about the possibility of increasing prices that the rising CPI indicates. Prices for Treasury instruments showed an improvement while stocks continued to be popular modes of investment for various investors.

How to Protect Your Investment from Inflation and Put More Money in Your Pocket

When you are investing with a long term horizon – say for retirement, for your kids’ college fund or for medical expenses, you should always take the effect of inflation into account. Because of inflation, you end up paying more than you used to for the same things. And as it is an inescapable aspect of the economy, your investment strategy should be adjusted to deal with it. [Read more…]

How Rising Interest Rates Will Impact You

The US economy has recovered from the economic recession, but with all the money that has been pumped in by the government, it is now facing the problem of inflation. The Federal Reserve is taking several steps to deal with inflation without touching benchmark interest rates. For example, it has stopped purchasing mortgage-backed securities, which will reduce the rate at which money is entering the economy. [Read more…]

Is Inflation Your Friend or Enemy?

Most people consider inflation as a big problem and high inflation does have a bad impact on the overall economy. However, there are some financial benefits that you get either indirectly or directly because of inflation. Knowing the positive and negative effects of inflation can help you in adopting an investment strategy that will give you good returns irrespective of inflation. [Read more…]

Do You Know What Your Saving Goals Are?

We are often told that we should allocate some of our income to savings. Some financial experts even come up with how much that allocation should be, and arbitrary numbers like 10% or 15% are recommended.

I have to say I don’t really understand this. How can they create a general rule about savings when all of us have a unique financial situation. And unless you know exactly what you are saving for, how can you decide how much to save? For all you know, you may just be better off spending some of that money now instead of keeping it for future. [Read more…]

How Inflation Affects Your Savings

Inflation is one of the most important factors that you should take into account when you are planning your finances. Without proper measures, inflation can make a huge dent on your savings. That is why it is critical to understand how inflation works and what you can do to protect your finances. [Read more…]

Balance Your Portfolio with Treasury Inflation Protected Securities

Usually most investment portfolios have a large percentage of stocks. In times of a financial boom, this worked great but if you planned for retirement in 2009, these same stocks would have led to huge declines in the value of your portfolio.

On the other hand, if you had put all your money in bonds or CDs (certificates of deposit), then you would have to live with dismal returns, especially when you consider the impact that 3% long term inflation will have on your savings. [Read more…]

Markets Reach Record High Since Recession

Post recession, the economy is surely and steadily recovering, and the impact can be clearly seen in the soaring stock markets. The US stock market recovery is being constantly backed by the Federal Reserve policies, and the Fed has recently announced that interest rates will continue to be kept low in the near future. [Read more…]

New Bubbles in the Economy Could Be Forming with Cheap Money

With interest rates close to their historical lows, some economists believe that new bubbles might be forming in some areas of the economy. If this is true, the Fed could be solving the current crisis but giving rise to a similar problem in future. [Read more…]