Inflation Running Too Low, QE to Continue

The U.S. Labor Department released its reading on inflation on Wednesday morning via the Consumer Price Index. Simply put, inflation is running too low and this is going to give Ben Bernanke and Janet Yellen all the fuel they need to keep getting the Treasury to print money so they can spend $85 billion in bond buying each month under quantitative easing.

Headline inflation fell by 0.1% in October, and the core reading after excluding food and energy rose by 0.1%. The big drop is a 1.7% decline in energy prices. Gasoline prices were down almost 3%, and the theory that the cost of energy equals inflation is getting easier to make.

Overall inflation was up 1.0% versus the prior year. This marked the lowest overall reading in more than three years, and this is well below the annualized Federal Reserve inflation target of 2%. What makes this report tricky to care too much about is that it was pretty much in-line with economist surveys.

The easing debate will continue. And continue …

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