In my comment of last June 30, 2006 (Sea Change 5), I wrote, “The FED is running a race in monetary policy between existing inflationary pressures and the economic slowdown led by the consumer.” After holding interest rates steady since that time, the economy has indeed weakened significantly since the second quarter of last year. While nominal inflation has receded since the second quarter of last year core inflation and increases in food commodity prices have actually increased over the last twelve months. The FED is now faced with a dilemma of lowering interest rates to sustain economic growth or keeping interest rates steady to slow inflation.

INFLATION

In the same June 30 comment and again in Part 1 of the Investment Update of October 8, 2006 I called attention to rising consumer inflation despite the more benign readings reported ... Log in to view full article.