As inflation rises this year, should we be worried?
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As inflation rises this year, should we be worried?
Jeremy Hobson: Does it feel like everything is getting more expensive? Well we’re about to find out when the government releases its monthly Consumer Price Index. Expectations are that food and energy costs pushed prices up 0.4 percent for the
month of February.
Richard DeKaser is an economist with the Parthenon Group and he’s with us now from Boston to discuss. Good morning.
Richard Dekaser: Good morning.
Hobson: Well Richard, it seems like the rise in gas, food, and other prices over the last month or so has been a lot more than 0.4 percent…
Dekaser: It might feel that way, but that’s probably what we’re looking at when we get the official numbers, and that’s concerning. People do confront gasoline prices; they tend to impact consumer confidence. But if you take a slightly larger picture and go back, maybe over the last year, and look at all prices, year-over-year inflation’s running about 3 percent. Now, that’s up from what we’ve been accustomed to in recent years, but historically speaking, not a big deal.
Hobson: Historically speaking not a big deal — so there’s not a trend that we need to be concerned about with inflation at this point?
Dekaser: Well, actually, I think the bad news might persist for a few months more as we see rising energy prices as we have. That tends to eventually seep its way into other prices. Everything gets to where it goes with transportation, and as those transportation costs feed through. So I wouldn’t be surprised if we see this trend of escalated inflation persist into the election season.
Hobson: And I’m sure that in the back of monetary policymaker’s minds is what happened in the 1970s, when inflation did get out of control. Is that something we need to worry about?
Dekaser: Policymakers surely are aware of the circumstances of the 1970s, when rising commodity prices were basically let slide and passed through to rising inflation — and ultimately stagflation. But I don’t think we’re looking at that right now.
Hobson: Richard DeKaser is an economist with the Parthenon Group joining us from Boston. Thanks Richard.
Dekaser: My pleasure.
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