Why raise rates when deflation still present? May PPI -0.3%

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVs.paA8fUzQ&pos=2

Still no inflation. Deflation still a very large threat. How can the Fed justify raising rates in this environment?

 

Inflation worries are a big yawn. I've had variable rate mortgages and nothing else for twenty years and it's saved me a fortune in interest... I'll pay them off pretty soon though, no mortgage is way better than a cheap one, one less thing to think about...

 

1) GS, after loading up on the short-side of the bond market, will pressure the FED to do so.
2) There could be a genuine flight back out of the dollar if it appears that Europe and Asia are "okay".

 

Why would this constitute a rate hike?

 

you're just unbelievably stupid

YoY PPI is 5.3%
is it a deflation?

 

People may abandon the dollar for those foreign currencies. The FED can "defend" the dollar with higher rates. :eek:

 

1. Deflation is not an object, it's a process.

2. MoM PPI is much more relevant. Unless you are "trading" long term (looking years ahead instead of months).


If PPI decreases for 5 straight years, will you claim we still don't have deflation because over the entire history of the Earth we've had inflation?

 

I realize this. My question is why would the Fed want to defend the dollar?

 

depends on the industry. Medical care and college prices have been exploding for years. And there has been a "threat of deflation" for a long time, but it never really has occurred. But from a Fed POV, I suspect it is based on some very cherished indicators

 

USA own't raise rates for a decade.