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Friday, December 05, 2008

Inflation Pressure Plummets: ECRI's FIG at 47-Year Low

The Economic Cycle Research Institute, a New York-based independent forecasting group known as ECRI, said inflation pressure is at a 47-year low. (More about ECRI)

ECRI's US Future Inflation Gauge (US-FIG), an index designed to anticipate cyclical turning points in inflation, plunged to a 47-year low.

The USFIG dropped to 88.5 (1992=100) in November from 92.7 in October, while its smoothed annualized growth rate dived to -35.3% from -31.8%. The gauge was pulled down in November by disinflationary moves in all available components.
"With the USFIG nose-diving to its lowest reading since 1961, U.S. inflation pressures have collapsed" said Lakshman Achuthan, managing director at ECRI.

Click to view full size chart courtesy of ECRI

The very low US-FIG means means the Federal Reserve can keep the Fed Funds rate low or cut it more since inflation pressures are still in a cyclical decline.

Oil Prices Per Barrel courtesy of
With gasoline selling for under $2.00 per gallon, even in Taxifornia, this should act as a stimulus package to help consumers.

The US Fig is at a 47-year low. Curious enough, my father bought his first home to raise our family in 1960 about 48-years ago, using a 4.00% CAL-VET loan. (He served in the US Navy during the Korean War.) Now there is talk the Fed will buy home loans to target a 4.5%, 30-year fixed mortgage rate. The low interest rates of the 1960s were followed by the high inflation of the 1970s and 1980s. Will history repeat itself?

More Information:

"Highest CD Rate Survey + Current US Treasury Rates"
Easier to read table here
Rate (APY)
(Click link for Full Rate Sheets)
Daily Savings
12/04/08 2.60%
Vanguard Prime Money Market Fund
Tax Exempt
12/04/08 1.13%
Vanguard Tax Exempt Money Market Fund
Online Savings 12/04/08 3.25%
High Performance Money Fund @ Wachovia Bank
3-Month Treasury
12/04/08 0.01%
US Treasury Rates at a glance
6 Months 12/04/08 4.32%
State Bank of India & 3.76% at Ascencia Bank
6-Month Treasury
US Treasury Rates at a glance
7 Months 12/04/08 2.60%
Wachovia Bank
1 Year
12/04/08 4.68%
State Bank of India & 4.10 @ Umbrella Bank
1 Year Treasury 12/04/08 0.64%
US Treasury Rates at a glance
18 Months
UmbrellaBank & 4.30% @ Capital One
2 Years

4.51% 1st Source Bank & 4.45% @ GMAC Bank
1 Year Treasury 12/04/08 0.90%
US Treasury Rates at a glance
3 Years
4.80% 1st Source Bank & 4.75% @ Intervest National Bank
3-Yr Treasury
US Treasury Rates at a glance
4 Years

5.05% Intervest National Bank & 4.96% @ Capital One
5 Years

5.25% Intervest National Bank & 5.20% @ Capital One
5 Yr Treasury
US Treasury Rates at a glance
7 Years
5.50% Capital One & 5.00% @ PenFed CU
10 Yr Treasury
12/04/08 2.63%
US Treasury Rates at a glance
7 Years 12/04/08
Intervest National Bank
30 Yr Treasury 12/04/08 3.13%
US Treasury Rates at a glance


  1. does that make TIPS a poor choice at this time?

  2. Ron, my advice is in my newsletter. If my newsletter recommendations are unclear, then I answer subscribers questions about my advice via email, not free, public forums. Here my interest is presenting and discussing data, not dispensing advice.

    With that said, I believe Inflation peaked in July at 5.6% and should head lower in the months ahead as the price of oil has plunged OVER 67% from a peak of $147.90 in July to $41.66 now. Here is a chart of Vanguard’s TIPS fund where you can see it was between $12 and $13 in July and is now about $11.50, down between 5 and 10%.... a lot for a TIPS fund.

    The price of TIPS, like the price of the stock market, should reflect all CURRENT information as well as consensus belief about the future. I like to take a contrarian approach, FWIW. Remember that contrarians buy when their price levels are reached but it doesn’t mean they/we buy at bottoms so patience and fortitude are required to get the good long-term results we show.

  3. Kirk, you have been labeled a malicious site by Facebook. What have you done! For shame! And congratulations. By the way, the video on the Fuhrer was so funny I almost died.


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