Newspaper article THE JOURNAL RECORD

Inflation Report Best in 30 Years

Newspaper article THE JOURNAL RECORD

Inflation Report Best in 30 Years

Article excerpt

WASHINGTON (AP) _ Consumer prices rose modestly for the fourth straight year in 1994, the best period of low inflation in three decades.

Analysts said it will be tough to extend the string, but the nation could come close as higher interest rates slow the economy.

The Labor Department said Wednesday its Consumer Price Index climbed 2.7 percent last year, matching 1993's performance. And the year ended much as it began, with a mere 0.2 percent rise in the CPI in December.

"We believe that inflation pressures will remain subdued, but that 1994's performance would be hard to repeat," said economist Bruce Steinberg of Merrill Lynch Co. in New York City. "There is still no real evidence of wage acceleration."

The consumer gauge rose 2.9 percent in 1992 and 3.1 percent in 1991.

While the Federal Reserve raised short-term interest rates six times last year _ pushing them up 2.5 percentage points _ the higher cost of borrowing has had minimum impact in slowing the economy outside the housing market.

But analysts said the normal lag time _ plus a predicted seventh rate boost by the Fed at the end of January _ will begin to restrain economic growth soon.

"The Federal Reserve has pushed interest rates up pretty aggressively and I expect another increase at the end of the month," said Roger Brinner, chief economist with DRI-McGraw Hill, a forecasting service in Lexington, Mass. "That will probably slow down the economy enough to stop major acceleration of inflation. The economy has been very robust, but it's headed for slower growth."

The stock market posted a modest gain after the inflation report was announced, but later stock prices turned lower.

The moderate increases in prices last year were practically across the board. Core inflation _ which excludes volatile energy and food components _ turned in its best showing in nearly three decades. …

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