Inflation Concerns Continue

[Aug 2, 2007.]

 

It appears that members of the Federal Reserve Board continue to be concerned about the specter of inflation.

Last month, the Fed chose to hold interest rates steady—even though the current housing crisis could jeopardize economic growth. Minutes from a Fed meeting in late June indicate that Fed officials have a "predominate concern" that inflation will not be turned back.

While it does appear that the situation regarding inflation may be improving, Fed officials said this was "not seen as convincing evidence that the recent moderation of core inflation would be sustained."

The core inflation rate does not include two key, yet ever-changing items—energy and food prices.

The minutes from the Fed meeting further stated, "Participants were wary of drawing any firm conclusions about future trends from a few monthly readings that could reflect transitory influences and remained concerned about forces that could contribute to inflation pressures."

The overall inflation rate has been on an upward trajectory because of increases in food and energy prices. Members of the Fed have been questioning whether such a trend is likely to affect the buying and business habits of CEOs, investors, and other Americans. In fact, consumer behavior could trigger a rapid rise in the inflation rate. As a result, Fed officials say there is a possibility of worsening inflation fears.

The release of the Fed minutes, however, did not have an immediate impact on stocks, with the Dow Jones Industrials rising to a record 14,000.41. In fact, the strong finish on Wall Street may be an indication that the economic picture is brightening.

The interest rate has remained at 5.25%—a familiar figure by now. The rate has been unchanged for a little more than a year. There are indications the rate may stay the same for the remainder of 2007.

Julie Ann Amos
August 2nd 2007

Recent Housing News

• Fed Surveys Consumers About Credit
  The Federal Reserve Board has now released its report on credit card solicitations and applications. The findings are significant, since the study included personal one-on-one interviews with American consumers. [01.08.07]


• Gaining Credit May Be Getting Tougher for College Grads
  A change in practices in the U.S. credit card industry may mean that it will be tougher than ever for college graduates to establish credit. [01.08.07]


• Mortgage Rates Unmoved
  Prospective homebuyers received some encouraging news recently, thanks to the fact that rates on 30-year mortgages stayed steady. The decision to maintain the status quo might have been surprising to some, given all the concerns being raised about inflation at this point in time. [01.08.07]


• New Credit Card Practice Under Scrutiny
  Some universities have been trying to cut costs by issuing university business credit cards to their employees. The practice can be less expensive than other means of trying to pay school bills. However, Arizona universities have run into a stumbling block in their effort to promote cost efficiency: financial abuse. [July 31st 2007]


• New Credit Card Scam Uncovered
  Internet experts say that credit card thieves are employing a new tactic: making donations to charity using pilfered charge cards. The strategy may enable thieves to steal more money than was possible in the past. [July 31st 2007]


• Consumer Borrowing Rises Dramatically
  The Federal Reserve is reporting that consumer borrowing skyrocketed in May—the greatest increase in credit card debt in 6 months. Consumer credit jumped 6.4%, which was a monumental increase over the 1.1% jump in April. In fact, the increase in May was just about twice the amount that financial observers were expecting. [July 31st 2007]


• Credit Card Companies Offer New Insight Into Consumer Spending
  The credit industry has uncovered some surprising news about consumer spending. Apparently, young people are going to become bigger spenders than their Baby Boomer parents. [July 25th 2007]


• Reasons for Bankruptcy are Varied
  A new study indicates there are a myriad of reasons behind consumer bankruptcies. The report shows that