Data was shown that claims the customer price index has been almost the very same for too long. There are numerous months that prices are flat on all goods and services. Most individuals are good when it comes to buying the normal food. No instant cash is needed for them. Part and parcel to the price index has been a near zero federal rate of interest. Deflation is generally seen when an interest rate is at a steady low rate for too long.
Low consumer prices
The Department of Commerce tracks the rise or fall of prices of goods and services, called the Consumer Price Index. For August, the CPI rose by .3 percent, after a .3 rise in July, as outlined by the newest York Times. The rise was attributed to prices of food and energy rising. Those two good are all that have changed. Everything else in customer prices seems to have stayed put. The costs of goods and services has not changed as a result of the connection between cost and demand. With so much joblessness, there is hardly any demand at all. Retailers aren’t benefiting. They are getting fewer customers and much less payday cash.
Rates of interest lower than ever
More is happening than just standstill consumer rates. There has also been a rate of interest at about zero for four months on federal interest rates. The interest rate set by the Federal Reserve is the rate of interest charged to banks when they borrow cash or lend short term loans to other banks. Many of the loans are used for one thing. This thing is loan credit. Less rates of interest are a good thing. More individuals borrow then. There is a catch. The economy won’t get any better with banks who do not want to lend. The value of cash goes down this way. This is because money just isn’t being used. Deflation is what this is considered.
Bad to have low federal rates
Many companies have to start considering how to proceed with deflation. Rates will have to go up with the value of goods going down. Wages will not go up with this, unfortunately.