Federal Reserve Chairman Ben Bernanke recently told a national television audience on the CBS news show “60 Minutes” that the Federal Reserve wouldn't allow inflation to go above 2 percent.
He expressed confidence that the Fed could raise interest rates in 15 minutes if he spotted inflation.
A trip to the grocery store might startle the Fed chairman. According to the Bureau of Labor Statistics data, meat prices have increased an average of 5.4 percent in the past 12 months. Milk is up 7.6 percent, and driving to the grocery store is more expensive as gasoline prices are up an average of 5.8 percent, according to the government data.
Food comprises about 12 percent of consumer spending, and gasoline accounts for nearly 5 percent.
Although the core consumer price index is up only 0.6 percent in the past 12 months, the trend in food and energy could be troubling. Core CPI excludes changes in food and energy costs, and many consumers probably wish they could do the same.
In the futures market, we’ve seen the price of raw materials move sharply higher recently.
Wheat is up about 35 percent since the start of the year. Other grains like corn and soybeans gained more than 20 percent. Cattle, sugar, and coffee experienced double-digit advances. These price changes indicate there may not be any relief at the grocery store any time soon.
Consumers are probably aware that higher prices are visible on the shelves of grocery stores and at the gas pump. That may be one reason consumer-sentiment surveys show the average person is concerned about the economy.
Fortunately, the Fed is ready to act on a moment’s notice to save them from whatever they believe inflation is.
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