from Bloomberg:
Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5 percent in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation.“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”
The bank president’s inflation forecast for 2011 exceeds central bank officials’ long-run preferred range of 1.7 percent to 2 percent, and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
For the Fed I have some news: Inflation is already rising. Crude oil has risen 85% since its lows just 3 months ago. Soybean prices have risen 40% off its lows. These prices are typical examples of what has happened to commodity prices since the beginning of this year! The government's PPI and CPI indicators are lagging indicators of about 6-9 months. Just watch the commodity indexes to know where the market is predicting that inflation will go.
