Inflation Rearing Its Ugly Head

In January I wrote a post about the topics we will be discussing in 2008. Inflation was definitely on the top of the list (commodities and China were on that list too). It appears this wasn’t for nothing. In the last couple of days a series of inflation related news suddenly accumulated. As always I’m here to sum it up in a post:

#1 China’s inflation rose to 11 year high
Another topic staring the aforementioned list was China which has displayed rising inflation levels for some time now. The Chinese inflation rate rose to 7.1% for 12 months ending in January.

#2 American food industrialists are concerned with price levels
Larry Pope, president and CEO of Smithfield foods, was quoted saying “There's going to be real food inflation in this country”. Wheat and meat prices are continually rising.

#3 Oil and gold prices keep breaking records
The price of gold reached another peak at 950$ and oil prices are toying with 100$ a barrel. Gold is traditionally considered a safe haven for times of inflation and oil, oil is just weird (there hasn’t seemed to be any fundamental change that explains the recent rise in oil price).

#4 The Fed has updated Inflation estimates from 2.1%-2.4% to 2.4%-2.8%
The CPI for January was published this week with a surprising 0.4% rise in prices. Apparently the Fed took that into account during their last monetary meeting and updated inflation estimates. It’s a dangerous game the Fed is playing with interest rates in these sensitive times. The European central bank has decided to avoid lowering interest rates so far. Apparently in order to battle rising price levels in Europe.

I’ve recently wrote a post on “How to protect your money from inflation” which I think might shed more light on the situation and on how to deal with it.