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THE NORMAL DEVIATE
Watch These 3 Inf lation Indicators By Tom Preston remember seeing the “WIN” buttons when I was a kid and having my parents explain inflation to me. The buttons, distributed at the behest of President Gerald Ford in 1974, stood for “whip inflation now.” Inflation was bad and whipping it was good. I also asked them what “burn the bra” meant, but they were more reticent about that one. But having a basic idea of what inflation was and what it does to prices helped me understand how the economy works. As time passed, I noticed when inflation was high or low. And since the early ’70s, inflation really hasn’t been an issue in the U.S. until now.
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A return to ’70s inflation? From 1973 to 1974, when “WIN” buttons proliferated and politicians campaigned on inflation fears, the average price of a gallon of gasoline rose about 31%. Inflation helped force Richard Nixon from office, and it pushed the Fed to raise the federal funds rate from 6% in January 1973 to 11% the following August. How does that compare with today? From September 2020 to September 2021, the price of a gallon of gas rose 40%. Prices for other consumer products have risen, too, but gasoline is a convenient metric, and it’s arguably one of the most psychologically important prices. So, with gas prices up and the public feeling the pinch of higher rent and higher prices in general, inflation has become a political talking point. The question is whether inflation will pose a long-term problem
PROBABILITY OF AN INTEREST RATE HIKE
20% (March 2022) 34% (May 2022) 60% (June 2022) –Chicago Mercantile Exchange projections for Federal Open Market Committee meetings
As inflation goes up, interest rates tend to go up, too. December 2021 | Luckbox
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