Increasing Rents And A Rising CPI Are About To Push Bernanke Into A Corner

The most widely used measure of inflation is the CPI, and despite the threat of deflation, that number has stabilised and it might start moving up again.

First of all, the global commodity surge could easily filter through to higher end-user prices.

And then a biggie — rents — are turning up again. The below chart from Morgan Stanley tells that story.

It seems possible that the Fed will be backed into a corner even before it can get its QE dreams at full speed.

If the CPI is positive, but the prices that matter (home prices, wages) remain in a downward spiral, Bernanke will be in the awkward position of fighting against a deflation that’s not even there in the numbers, but which is real and gnawing nonetheless.


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