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Creepy

Fed Governor Ben Bernanke was at it again yesterday, the occasion being a luncheon gathering of the Investment Analysts Society of Chicago. Dr. Bernanke continued to tow the Fed's party line on inflation, to wit:

"In my view, there still is an output gap and I think that it will continue to create some downward inflation pressure ... I think that currently the output gap and productivity are both factors that are going to help keep inflation under control over the next couple of years."

His prepared speech dealt with the various vehicles -- many highly theoretical in nature, but Dr. B. was a Princeton eco professor -- the central bank uses to assess inflation and the threat thereof. Frankly, as I read through the speech, I kept having eery visions of the kind of things that fascinated John Merriweather and his Long-Term Capital Management associates. But don't take my word for it, have a look at Bernanke's prepared comments in their entirety at: http://www.federalreserve.gov/boarddocs/speeches/2004/20040415/default.htm

At any rate, while Ben Bernanke is reasonably sanguine about inflation "over the next couple years," the longer end of the Treasury yield curve has been less so recently. And as odd as it may seem, I suspect inflation concerns recently showing up in Treasury yields have at least partially been spawned by the same inflation data -- "official" inflation data generated by "official" US government agencies, no less -- from which Dr. Bernanke and his Fed colleagues continue to take comfort.

From Wednesday's missive (4/14, "Inflation Watch ..."):

"The latest CPI results reflect the inflation 'creep' also showing up in other measures."

In addition to the Consumer Price Index, the following table breaks out some of the "other measures" in which the "creep" is showing up. And while no numbers for them appear below, remember the piece I wrote not long ago about some of the disquieting price data coming from the Institute for Supply Management's indexes measuring the economy's manufacturing and non-manufacturing activity (4/6, "Where Is PPI Inflation Hiding?").

    % Change
Series As Of Y/Y 3-Month*
CRB Futures Index 3/2004 22.2 52.7  
Import Prices 3/2004 1.2 12.0  
Consumer Price Index 3/2004 1.7 5.1  
Producer Price Index 2/2004 2.1 3.6  
*Compound annual rate.
 
NOTE: "Inflation Watch" and the four measures shown above will make regular appearancesin the coming GRA website.

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