http://www.latimes.com/business/money/la-fi-mo-producer-prices-inflation-wholesale-economy-20131213,0,6458844.story
In the past several months, the rate of inflation has fallen to 0.7%, which is a very manageable rate. This is due to the fact that the Consumer Price Index has fallen as well, which some are speculating is a result of lower energy prices in the Energy Price Index. The affect of lower energy prices certainly could affect the Consumer Price Index, which could mean that the current rate of inflation is artificially low. In any case, the current rate of inflation is very low, which probably coincides with the still relatively high unemployment rates, which do not include those who have stopped looking for work.
Because the Federal Reserve has kept interest rates so low for the past several years, it is not a surprise that inflation is falling. However, this has not helped the unemployment rate to fall back to the normal levels it saw before the housing market crash in 2008. Keep in mind that the Phillip's curve demonstrates that as inflation rises, unemployment drops. If the Federal Reserve wants to actually help unemployment return to normal levels and aid the economy, it should raise interest rates to effectively increase inflation to higher rate than 0.7%, which is not enough to jumpstart our economy.
It is good that the inflation rate is falling, but when I did my articles on inflation for my blogs, like you say, it is not good to have the inflation fall too low, and for our economy to get a jumpstart we do need some inflation.
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