Picture du Jour: Inflection point for inflation
By Prieur du Plessis, on January 14th, 2011 posted in:
Economy,
Inflation,
US 
The U.S. economy is on the brink of turning from a deflationary environment to an inflationary one, according to Deutsche Bank (via Business Insider – Clusterstock).
Deutsche Bank said: “For the past several months we have emphasized the notion that the inflection point for consumer prices, whereby disinflation yields to modest inflation, is likely to be reached in the near term – probably sometime in the current quarter. When this trend becomes more apparent, it will have significant implications for the monetary policy outlook and interest rates. In particular, the decisiveness of the turn in inflation will influence the Fed transition from quantitative easing toward less accommodative policy. If the inflation profile evolves as we project, then the probability for QE3 is low.”
It is quite apparent that inflationary pressures have started building up. (How long ago did the Fed remark that inflation was “well-anchored”?)
Source: Business Insider – Clusterstock, January 12, 2011.
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Rising prices for core goods that everyone must buy – food and energy – will have an overall deflationary impact. It will sap buying power from weakened consumers.