Inflation Watch March 2011
• Producer prices showing signs of inflation, consumer prices are more tame, but higher than expected
• Underlying inflationary pressures seen in commodity prices
• Oil / energy prices are increasing
• Gold, other metals and commodities prices high
• Dollar is weak, however some are forecasting it to rise this year. A weaker dollar makes imported goods more expensive and adds to inflationary pressure
The deflation talk has quieted, but inflation has become a growing concern. Some that stagflation will take hold with the current weakness in the job market (high unemployment and high inflation). This situation can be very difficult for the Fed to combat inflation due fear of further job market deterioration.