Originally Posted by
ryan1234
Part of the Fed's problem is that they use CPI as a gauge. Inflation does have an impact on rising consumer prices, however inflation is brought on by an increase in the supply of credit and money... CPI can go up (or down) for a number of reasons: import-export, general competition, foreign currency... Not to mention that certain goods/services are more price flexible. Social Security and other entitlements are based on CPI (if I remember correct) .. so the government would rather it be low.
- just my two cents (inflation/deflation adjusted)
Possible, but from a government viewpoint inflation is a good thing because it reduces the payout on debt obligations, they like to see the system run at about a 3% rate of inflation. Deflation increases their debt obligation.