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Kai Ryssdal: You might not believe this, but Ben Bernanke really does have your best interests at heart, even if it seems like he’s only ever worried about the big banks and the overall economy.
Today is a great example. The Commerce Department released its latest figures on consumer spending this morning. The relevant detail is that it rose six-tenths of one percent. It’s relevant because our spending drives 70 percent of what happens in this economy.
But with higher prices for food, energy and almost everything else, inflation has essentially zeroed that spending out and that means that when the Federal Reserve meets to talk about interest rates tomorrow, our problems with high prices will be right at the top of their agenda.
Here’s our senior business correspondent Bob Moon.
Bob Moon: This may violate the laws of physics, but under the laws of economics, it’s actually possible to have what’s essentially become a whistling teapot full of lukewarm water.
Even as the economy cooled off, food and energy prices kept on rising and now inflation is threatening to boil over into other expenses.
Still, household consumption surged in June, thanks in large part to those government rebate checks, but most Americans were left asking, “What have we got to show for it?”
Joel Naroff: We’re spending a lot more money, but we’re not getting as many goods and services as we had been.
Commerce Bank chief economist Joel Naroff says even core inflation — leaving out volatile food and energy costs — now exceeds the Federal Reserve’s target of no more than 2 percent a year.
Naroff: Inflation is clearly higher than they want it, but at the same time, the economy is not strong enough for them to attack the inflation problems.
Sometimes it can take a while for the pot to stop steaming, even when you’ve already turned down the heat. So Wachovia economist Adam York suggests the central bankers might want to wait for now.
Adam York: We might be looking for some more hawkish language. The Fed may be looking to talk a big game about their worries on inflation. We don’t think a rate change is in the cards.
Likewise, says Mark Zandi at Moody’s Economy.com. He’s hopeful that things are turning in the Fed’s favor.
Mark Zandi: Already gasoline prices are receding, so I think looking forward, they probably feel a bit more comfortable. Even though they’re not comfortable, they feel a bit more comfortable than they did a few weeks ago.
The interest-rate policymakers will be deciding what they should do, if anything, tomorrow.
I’m Bob Moon for Marketplace.