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US Inflation Goes Down, Food Prices Rise

[May 26, 2008.]


The price of food in America kept going up over the course of the last few months. The rate of price increase for America's grocery shoppers is the highest it's ever been in 18 years, as of April of 2008.

According to the United States Labor Department, the cost of food went up by 0.9% during April of 2008. For comparison, the total prices of all consumer goods across the board went up by only 0.2% during the same month. That is an improvement over the rate for March, in which all consumer goods increased in price by 0.3%.

The rapidly increasing food prices were not as damaging to average consumers as they could have been, because, as the above figures show, the comparatively low, slower-increasing prices of other consumer products compensated for the relatively high, rapidly-increasing price of food. Home furniture, for example, got cheaper during April of 2008.

At the same time, the slowing annual rate of inflation, which at 3.9% is somewhat lower than economic analysts had predicted, cushions the effect of rising food prices even more. Yet, the situation is risky. Oil prices have skyrocketed over the course of this past year, and show few signs of slowing down. The price of oil has gone up to $127 per barrel.

Food and oil are basic necessities for the average American consumer. Some economic analysts are worried that the high price of oil, combined with the increasing price of food, will push inflation back up. Perhaps, inflation will increase to even higher levels than those at which it had been previously

The threat of rising inflation may prompt the Federal Reserve to slash the nation's Prime Interest Rate yet again. David Watt, working at the RBC Capital Markets offices in Toronto, stated that lowering America's interest rates “allows the Fed to do what it feels it has to do to sustain growth later this year.”


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