the 1980s, and even the early 1990s, the current rate of inflation is quite low. The increased volatility is primary due to fluctuations in the prices of oil and food. The core rate of inflation represents the consumer price index without the influences of changes in prices of food and oil is often featured in news reports. The core rate this month is less because of decreases in petroleum-based energy costs. Future of InflationLast month, the Federal Reserve met and lowered the target federal funds rate by one-half of a percentage point. The "beige book" (summarizing the economic conditions in each of the Federal Reserve districts) issued prior to that meeting discussed higher energy prices. But most of the observations were that upward pressures on prices were easing.On April 18, the Federal Reserve announced another reduction in the target federal funds rate by one-half of a percentage point to 4 1/2 percent. The reduction was announced between formal meetings of the Open Market Committee and was described in the press as a surprise announcement.The Federal Reserve is concerned with continued slowing in the growth of spending with the result being either a serious slowing of growth or an actual recession. The announcement does not mention concern with potential inflationary pressures. In fact, just the opposite is described as a continuing concern. Gross Domestic ProductThe GDP price index (sometimes referred to as the implicit price deflator) is an index of prices of all goods and services included in the gross domestic product. Thus the index is a measure of prices that is broader than the consumer price index.The producer price index measures prices at the wholesale or producer level. It can act as a leading indicator of inflation. If the prices producers are charging are increasing, it is likely that consumers will eventually be faced with higher prices.Real Gross Domestic Product during the fourth quarter of 2000 increased at...
