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Recession . . . with a silver lining

Nancy Marshall-Genzer Mar 14, 2008


Lisa Napoli: It’s been another lousy day for the dollar, although it edged back from record lows against the euro. Then there’s oil — it’s flirting with a $111 a barrel.

There’s no denying it any longer. The headline in the Wall Street Journal reads: Economists say recession is here. At least: the gaggle of economists the Journal surveys for its forecasts is saying that.

Meanwhile, The Labor Department said this morning that the Consumer Price Index last month wasn’t as awful as it had expected. We asked Marketplace’s Nancy Marshall Genzer to explain.

Nancy Marshall Genzer: One thing that kept the CPI steady in February was energy prices. They actually went down a half a percent. Food prices were up, but not as much as in January. That may be because transportation costs were easing.

What’s going on? Well, according to Moody’s Economy.com economist Gus Faucher we’re now in a recession. Which happens to have a silver lining.

Gus Faucher: There is weakness in the economy that is preventing firms from raising prices. They are just worried about scaring away their customers, given the detioration in the economy and the weakening labor market.

The lower-than-expected inflation could also give the Fed leeway to cut interest rates yet again when it meets next week. With prices down, the Fed won’t have to worry as much about overheating the economy by making loans cheaper.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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