Flat consumer rates could make paydays really worth less

Recent data were released that indicated the consumer price index has barely moved for a long time. There are numerous months that prices are flat on all goods and services. It doesn’t require just a little instant cash to purchase the normal food. The federal rate of interest for part and parcel to the price index has been at about zero. A rate of interest that holds steady at a low threshold is practically the Fifth Horseman of the Apocalypse, as it usually signals deflation.

Low customer prices to view everywhere

The Department of Commerce tracks the rise or fall of prices of goods and services, called the Consumer Price Index. The brand new York Times reports that a .3 percent rise happened for the CPI in both July and August. This was considered to be happening because food and energy costs were going up. Consumer prices haven’t changed at all except for those two goods. Cost of goods and services is tied to demand, and with unemployment up to it is, hardly any person is willing to spend much. Retailers are getting much less payday money for sure.

Interest rates lower than ever

Along with consumer prices staying low, federal interest rates are at near zero for months. Banks are required to abide by the interest rate the Federal Reserve set. Banks have to use the rate when lending to other banks or borrowing. Loan credit is the purpose of these loans. Much less interest rates are a good thing. More people borrow then. A catch is always present with things like this. It appears too good to be true. The economy will not get any better with banks who don’t want to lend. Since hardly any cash is being used, cash begins losing a lot of value. That is the definition of the word deflation.

Federal rates being so low is hurting

Numerous companies have to start thinking about how to proceed with deflation. Rates can have to go up with the value of goods going down. However, that will not be accompanied by a rise in wages.

Additional reading

NY Times

nytimes.com/2010/09/18/business/economy/18econ.html?src=busln