Long-term inflation rates will follow their course on their own regardless of temporary food-and-energy price spikes, according to a study by the Federal Reserve Bank of Boston.
In other words, the Fed is standing by its recent statements that the rising prices of food, fuel and other commodities won't have a lasting impact on overall inflation rates.
"Evidence from recent decades supports the notion that commodity-price changes do not affect the long-run inflation rate," Boston Fed research Geoffrey Tootell writes in a report, according to The Wall Street Journal.
Fed Chairman Ben Bernanke has said that high food and gasoline prices are the result of global growth and supply issues, adding that commodity prices will stabilize.
|Fed Chair Ben Bernanke
(Getty Images photo)
Bernanke has also said he expects the economy to continue growing, unemployment rates to fall and inflation to remain at levels that don't merit changes to monetary policy at this time.
Gasoline prices, meanwhile, won't stay high forever.
"Our view is gas prices will not continue to rise at their recent pace. As they stabilize and even come down as the situation stabilizes in the Middle East, that will provide some relief on the inflation front, but we will have to watch it very carefully," Bernanke says, according to MSNBC.
Furthermore, Bernanke adds, keeping inflation rates too close to zero threatens to push the economy into a deflationary cycle, which means higher unemployment.
"Attempting to maintain inflation at zero will increase the risk of experiencing an extended bout of deflation or falling wages and prices, which in turn can lead employment to fall below its maximum sustainable level for a protracted period."
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