In a letter to a Senator, 
Federal Reserve Chairman Ben Bernanke said that he expects "slack resources, together with the
stability of inflation expectations, to contribute to the
maintenance of low inflation in the period ahead."
This came on the same day that the government said the producer price index surged by 1.8 percent, more than double the increase analysts expected. Even stripping out the volatile energy and food costs still resulted in an increase in the core value of 0.5 percent. That was the biggest increase in prices in more than a year.
Bernanke and his colleagues opened a two day meeting today to set their target interest rates. Given the high levels of unemployment and the general weakness in the economy, it is highly unlikely that the Fed will increase interest rates from their current record lows of near zero.
Bernanke noted that in addition to the ten percent unemployment rate, manufacturing capacity utilization is at 68 percent. That is lower, he noted, than the trough of every recession since World War II.
Traders sold off stocks on the producer price index numbers. The Dow dropped by 0.5 percent to 10,452, ending a streak of five days with a gain. The S&P 500 declined by 0.6 percent to 1,108. The Nasdaq also fell, shedding 0.5 percent to 2,201.
While the markets reacted to the producer price index numbers, the big news for the week will come tomorrow, with Bernanke and his colleagues at the Fed releasing the minutes of their deliberations on interest rates. Nobody expects the Fed to increase rates but they will look at the minutes for clues on future Fed actions.
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This came on the same day that the government said the producer price index surged by 1.8 percent, more than double the increase analysts expected. Even stripping out the volatile energy and food costs still resulted in an increase in the core value of 0.5 percent. That was the biggest increase in prices in more than a year.
Bernanke and his colleagues opened a two day meeting today to set their target interest rates. Given the high levels of unemployment and the general weakness in the economy, it is highly unlikely that the Fed will increase interest rates from their current record lows of near zero.
Bernanke noted that in addition to the ten percent unemployment rate, manufacturing capacity utilization is at 68 percent. That is lower, he noted, than the trough of every recession since World War II.
Traders sold off stocks on the producer price index numbers. The Dow dropped by 0.5 percent to 10,452, ending a streak of five days with a gain. The S&P 500 declined by 0.6 percent to 1,108. The Nasdaq also fell, shedding 0.5 percent to 2,201.
While the markets reacted to the producer price index numbers, the big news for the week will come tomorrow, with Bernanke and his colleagues at the Fed releasing the minutes of their deliberations on interest rates. Nobody expects the Fed to increase rates but they will look at the minutes for clues on future Fed actions.
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