Newspaper article The Christian Science Monitor

Inflation Rate Is under Control

Newspaper article The Christian Science Monitor

Inflation Rate Is under Control

Article excerpt

INFLATION may be the great bogyman of the United States Federal Reserve Board. But the growing consensus among most economists is that - barring the unexpected - there's just not going to be all that much of it around during the next year.

"All the evidence suggests that inflation is just not a major problem, although it's still obviously higher than the Fed would like," notes David Wyss, an economist with DRI/McGraw-Hill, an economic consulting firm based in Lexington, Mass.

According to a broad range of economists polled by Blue Chip Economic Indicators, a newsletter based in Sedona, Ariz., consumer prices will rise just under 4 percent during the next four quarters. Federal Reserve Board chairman Alan Greenspan told Congress recently that he expects inflation to be about 3.5 percent in 1991.

That's down from 6.1 percent in 1990.

Indeed, the federal government's latest statistics, out last week, showed that consumer prices rose a modest 0.2 percent in June over May. Inflation is now running at an annualized rate of 2.7 percent for 1991.

DRI/McGraw-Hill also finds its projections spinning gradually downward. DRI sees core inflation (excluding food and energy prices) now running at about 4.5 percent; but that is expected to fall to 4 percent or under.

Mr. Wyss believes that overall consumer inflation will show a sharp drop for this calendar year down to the 3 percent level. Compare that to the double-digit rates of the late 1970s, when energy costs were roaring into the stratosphere.

Wyss sees several factors conspiring to keep inflation relatively low: Productivity is increasing, as normally happens when a nation comes out of a recession. Wage settlements have been coming in lower than in recent years, due to a slack labor market following work force cuts at many companies. Commodity prices, with the exception of agricultural goods, have been "going through the floor." Add all that up, and core inflation - the basic element of the overall inflation rate - is under better control than in recent years. …

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