Records was shown that states the customer price index has been almost the very same for too long. For months on end, prices of goods and services have remained essentially flat. Most people are good when it comes to getting the normal food. No instant payday loans is required for them. Part and parcel to the price index has been a near zero federal interest rate. Deflation is generally seen when an interest rate is at a steady low rate for too long.
Low consumer prices
The Department of Commerce makes sure to know how much goods and services are costing, and the rise and fall of that price. This is called the Consumer Price Index. The newest York Times reports that a .3 percent rise happened for the CPI in both July and August. Many thought there were only a couple reasons the number would rise. Many thought it was energy and food prices rising. Consumer prices haven’t changed at all except for those two goods. Demand and cost connect together, and since nobody is demanding with so much unemployment, costs don’t move. Retailers aren’t benefiting. They’re getting fewer customers and much less payday cash.
Cannot beat the low interest rates
For about four months, federal rates of interest are at about zero while consumer prices don’t change. When banks borrow or lend to other banks, the rate of interest the Federal Reserve set is what banks have to use. The majority of the loans are used for one thing. This thing is loan credit. Less interest rates are a good thing. More individuals borrow then. There is a catch. The economy won’t get any better with banks who don’t want to lend. The value of cash goes down this way. This is because money just is not being used. That is the definition of the word deflation.
Low federal rates aren’t good
Suppliers will have to raise the rates if deflation begins to happen to stay in business. However, that will not be accompanied by a rise in wages.
Further reading
NY Times
nytimes.com/2010/09/18/business/economy/18econ.html?src=busln
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