It is clear that the Fed is only using the CPI numbers at their face value to measure inflation, but not digging deeper to find what's beneath them. While the benign CPI is finally showing signs of inflation, signs of deflation is actually growing like a cancerous cell. [read]
When Feb raise short rate above 1% to fight inflation, the deflation items hidden inside the CPI will be more appearent than ever.
The Fed will miss the deflation in 2004 just as it did for inflation in 2003, and while causing the stock market to crash by wrongfully manipulating interest rates in the wrong direction.
posted by jason @ 9:28 AM
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