Persistently Low Inflation

The Bureau of Labor Statistics reported that annualized U.S. inflation for the month of October was 1.3% which marks almost a decade of inflation below 2.0%. Following October’s report, Federal Reserve Chairman Jerome Powell stated, “We would need to see a really significant move-up in inflation that’s persistent before we would consider raising rates.” How is it that the record low unemployment in this country isn’t spurring inflation? Historically, a low unemployment rate requires business owners to raise wages to attract qualified candidates which increases production costs and ultimately boosts inflation. But since the Great Recession we have seen a decoupling of this relationship as they are no longer negatively correlated. While economists debate the reasons for persistently low inflation one thing is for certain: Business owners looking to expand operations continue to have access to capital at low rates. 


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Persistently Low Inflation