ECRI's FIG Shows Inflation Pressure at Fresh 50-Year Low

The Economic Cycle Research Institute, a New York-based independent forecasting group known as ECRI, said inflation pressure is at a 50-year low. (More about ECRI.)

Underlying inflationary pressures dropped further in January 2009, according to ECRI's U.S. Future Inflation Gauge (USFIG). The value of the USFIG lies in its ability to measure underlying inflationary pressures and thereby predict turning points in the U.S. inflation cycle.

The USFIG declined to 81.8 (1992=100) in January from 84.5 in December, while its smoothed annualized growth rate (charted below) slipped to -38.8% from -37.9%. The gauge was pulled down in January mainly by negative contributions from measures of loans, vendor performance, unemployment and job growth, partly offset by a positive contribution from a measure of commodity prices.

Commenting on the data, Lakshman Achuthan, Managing Directors ECRI said

"With the USFIG locked in a clear cyclical downswing, U.S. inflation pressures areessentially non-existent. Rather, there are continued downward pressures on U.S. consumer prices."

Click to see larger FIG Growth Rate chart

The very low US-FIG means means the Federal Reserve can keep the Fed Funds rate low since inflation pressure is still in a cyclical decline.

The Fed Funds target rate is currently a range between zero and 0.25%.

More Information:

• More about ECRI US-FIG Growth Rate
  
  
• US Treasury Rates at a Glance
  
  
• World Stock Markets at a Glance
  
  
• Libor Rates at a Glance
  
  

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ECRI's FIG Shows Inflation Pressure at a 50-Year Low

The Economic Cycle Research Institute, a New York-based independent forecasting group known as ECRI, said inflation pressure is at a 50-year low. (More about ECRI.)

Underlying inflationary pressures dropped further in December, according to ECRI's U.S. Future Inflation Gauge (USFIG). The value of the USFIG lies in its ability to measure underlying inflationary pressures and thereby predict turning points in the U.S. inflation cycle.

The USFIG declined to 85.5 (1992=100) in December from 86.7 in November, though its smoothed annualized growth rate (charted below) ticked up to -36.5% from -37.7%. The gauge was pulled down in December by disinflationary moves in measures of commodity prices, vendor performance, unemployment and job growth, partly offset by inflationary moves in measures of loans and interest rates. A spokesperson for ECRI said:

"It is notable that the USFIG was in a clear cyclical downswing in mid-2008, when financial markets and monetary policy makers alike were mistakenly concerned about the threat of inflation. With the USFIG now sliding to a half-century low, U.S. inflation pressures are in full retreat."

Click to see larger FIG Growth Rate chart

The very low US-FIG means means the Federal Reserve can keep the Fed Funds rate low since inflation pressure is still in a cyclical decline.

The Fed Funds target rate is currently a range between zero and 0.25%.

More Information:

• More about ECRI US-FIG Growth Rate
  
  
• US Treasury Rates at a Glance
  
  
• World Stock Markets at a Glance
  
  
• Libor Rates at a Glance
  
  

Post your Comments Here