>I am sure, like me, many of you have noticed the sharp rise in the cost of goods and services over the past year. We are all familiar with the rise of gas prices, but I have noticed that basic groceries like milk, bread, vegetables and meat have been on the rise. I like to think of my wife and I as being frugal shoppers, but despite using coupons and looking for deals our grocery bills have risen by 25% to about $600 a month. Well today, the Labor Department reported that wholesale prices rose 1.1% last month alone. That was the second biggest increase in the past 33 years and near triple the rate analysts had been expecting.
The reports show inflation pressures, which are occurring at a time when the overall economy is slowing and many analysts believe it may have already toppled into a recession. That raises concerns that the country could be facing another out of stagflation, the malady that last occurred in the 1970s when economic growth stagnated but inflation kept rising. Such a development would put the Federal Reserve in a bind. The central bank has been cutting interest rates in an effort to combat the current slowdown. However, if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse. (USA today)
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