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Has economy hit sweet spot in prices?

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STEVE CHIOTAKIS: Word today from the government that consumer prices rose slightly in August — three-tenths of a percent. That’s a slightly bigger increase than expected. Core prices — which exclude food and energy — remained pretty much flat for the month. Jill Schlesinger is editor-at-large over at CBS MoneyWatch. She’s with us live from New York as she is on Fridays. Good morning.

JILL SCHLESINGER: Good morning.

CHIOTAKIS: All right, so with the economy in tatters, Jill, the Fed’s been pumping all this money into the economy and I’m thinking, you know, isn’t that one of the first signs that inflation is going to take hold? And it hasn’t done it, right?

SCHLESINGER: No it has not. And the reason is that a credit crisis, which we’ve just experienced, is really by its very nature deflationary. Meaning that consumers spend any available money basically paying down debt, increasing their savings. They’re not going to the stores, they’re not buying stuff and they’re not driving up prices. That keeps prices low.

CHIOTAKIS: What does it say then, Jill, about the economy overall if we’re in this sort of sweet spot. What does it mean?

SCHLESINGER: Well it does mean that the Fed can keep interest rates low for the foreseeable future — that’s good for borrowers, it’s good for people who owe money, it’s good for companies, I think, because eventually are going to be able to raise prices, they’ll make more money and hopefully have better earnings. And for consumers, I think it is actually goods news. We get to pay lower prices, at least in the short term. So all in all, no inflation is good and the lack of deflation also good.

CHIOTAKIS: Jill Schlesinger, editor-at-large over at CBS MoneyWatch. Jill, thanks.

SCHLESINGER: Thank you.

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