Inflation & Interest Rates Are Going Up, Confirming Future News Prediction

Future News-Inflation and Interest Rates Are Going Up, Confirming Future News Prediction
Bill Tenuto
April 23, 2005
PBU16

On March 14, 2005 in "The U.S. Economy Headed For A Fall", I wrote:

"The economy will soon take a downturn, inflation will rise, [and] the Federal Reserve will raise interest rates…."

"Under building pressure from increased prices for oil, natural gas and gasoline, inflation is on the verge of abruptly springing upward. This is already happening. We are just not hearing about it yet in the national media."

"We know that the policy of Greenspan and the Federal Reserve has consistently been one of checking the rise of inflation by raising interest rates. Therefore, as inflation goes up, interest rates will go up too. Everyone…will be…paying higher prices for everything. This is coming soon."

By the time the month of March 2005 had ended, the Consumer Price Index had taken a one month jump of 0.6 percent and the core rate, which excludes food and energy, had jumped 0.4 percent, the largest one month increase in almost four years.

Perhaps because of "frothy, happy conditions back in March" and "investors believing the economy was moving at a good clip" (NBC Nightly News, April 15, 2005), the news media in March did not even hint that inflation was, by then, already on its way up. It was not until new data about inflation were recently released that the news media could tell us what really had been going on with inflation in March.

On April 21, 2005, the headline below appeared on the front page of The New York Times. (For the Web edition see, "Fears of Rising Inflation Send Shares to New Lows for '05": http://www.nytimes.com )

The front-page, print edition headline said:

"Inflation Fears Pummel Stocks; New Lows for '05. Consumer prices up 0.6%. Fed is Expected to Keep Raising Rates Even if Economy Slows."

The article beneath this headline reported:

"Fears of rising inflation sent stocks to new lows for the year yesterday after the government reported a sharp increase in consumer prices that all but guaranteed that the Federal Reserve would continue to push interest rates higher even as the economy may be slowing."

"A 0.6 percent increase in the Consumer Price Index last month was the largest in five months, the government reported. The 0.4 percent jump in the core rate, which excludes food and energy, was twice the forecast from analysts and the biggest monthly increase in nearly four years."

"With inflation to the top range that Fed policy makers consider acceptable, analysts said, they may have little choice but to push rates steadily higher even if such actions threaten to slow economic activity further."

© 2005 by William L. Tenuto