Inflation or deflation? by Milota Sidorova

Although it seems to be rough when it comes to the U.S. economy – considering FED reports about „not rising up from recession“, unemployment and still above average level industry, something strange is happening there right now. While steps beating inflation possibly made impact, the current rate of inflation remains under exected level and makes 1.4 percent. As cited according to FED this number is under its „comfortable inflation level“ that makes around 1.7-2.0 percent. And though it may be bit early to speak about the opposite trend, some analysts see it as upcoming deflation. But are there reasons for thinking about deflation? Crops in se! veral, though the most important global producers went down and for example Russia banished selling its own wheat abroad. That makes stress on prices of food which are expected to rise up. Russia is not the only one having miserable crops this summer, the same trend have hit also Europe. Also oul prices are expected to grow and since the oil is present in almost every step of production, the prices will definitely rise. So why are American analysts speaking of deflation? Most of them see it as a natural consequence of consumers´ habits. People have become „price sensible“ and the demand went down for a while. That made the prices going down, but actually some companies and commodities went up. For example Starbucks and Budweisser are currently rising prices and some more important corporations have the same intentions The latest inflation projection was around 2.2 percent. Fed however, said it was too early to rely on analysts´ reports and focus more ! on real data on consumer spending.

related story (sgx 18266): http://news.yahoo.com/s/nm/20100926/bs_nm/us_economy_weekahe...

by Milota Sidorova for Cantell TV (http://cantell.tv)

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