Inflation in America at 0.8pc

More Than Mortal · January 16, 2015, 07:19:27 PM

No doubt due to the depression of oil prices we're currently witnessing. Just read it in the FT.

It's going to complicate the Federal Reserve's job of raising interest rates too, because they're going to want to bring inflation back up.

DAS B00T x2 · January 16, 2015, 07:26:38 PM

I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?

Mordo · January 16, 2015, 07:27:18 PM

inb4metajargon

More Than Mortal · January 16, 2015, 07:28:20 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM

I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?

Woah woah woah, slow down buddy.

Inflation is an economy-wide increase in the price level, there isn't an inflation 'on' interest rates.

DAS B00T x2 · January 16, 2015, 07:33:15 PM

Quote from: Meta Cognition on January 16, 2015, 07:28:20 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM
I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?
Woah woah woah, slow down buddy.

Inflation is an economy-wide increase in the price level, there isn't an inflation 'on' interest rates.

Okay.
And... like...

I can't mentally bridge the gap between macro and micro economics.

More Than Mortal · January 16, 2015, 07:34:27 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:33:15 PM

Quote from: Meta Cognition on January 16, 2015, 07:28:20 PM
Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM
I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?
Woah woah woah, slow down buddy.

Inflation is an economy-wide increase in the price level, there isn't an inflation 'on' interest rates.
Okay.
And... like...

I can't mentally bridge the gap between macro and micro economics.

When the Federal Reserve talks about raising or lowering interest rates, they're talking about the fed funds rate--a very specific interest rate to do with interbank trading.

Turkey · January 16, 2015, 07:38:10 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM

I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?

Asking about inflation rate of interest is like asking about how fast a car's acceleration changes -- that is, the rate of change of a rate of change.

DAS B00T x2 · January 16, 2015, 07:40:50 PM

Quote from: Meta Cognition on January 16, 2015, 07:34:27 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:33:15 PM
Quote from: Meta Cognition on January 16, 2015, 07:28:20 PM
Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM
I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?
Woah woah woah, slow down buddy.

Inflation is an economy-wide increase in the price level, there isn't an inflation 'on' interest rates.
Okay.
And... like...

I can't mentally bridge the gap between macro and micro economics.
When the Federal Reserve talks about raising or lowering interest rates, they're talking about the fed funds rate--a very specific interest rate to do with interbank trading.

And a higher rate means more growth, right?

More Than Mortal · January 16, 2015, 07:46:11 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:40:50 PM

And a higher rate means more growth, right?

If you want to look at economic growth, you really need to look at nGDP.

Interest rates are seen (incorrectly, in my opinion) as 'indicators' of policy which can be used to secure proper growth. For instance, after the stock market crash of 1987, the Fed lowered interest rates in order to keep banks trading and stop it affecting the real economy. However, in times of prosperity it's not unusual for the Fed to raise interest rates to curb lending and stop the economy from 'overheating'.

The Lord Slide Rule · January 16, 2015, 07:46:21 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:26:38 PM

I feel kinda dumb for asking this... but I'm actually clueless.

The inflation on these interest rates, how can that relate to the inflation of produce or is it entirely unrelated?

I'm pretty dumd when it comes to economics so you're not alone.

DAS B00T x2 · January 16, 2015, 07:47:03 PM

Quote from: Meta Cognition on January 16, 2015, 07:46:11 PM

Quote from: DAS B00T x2 on January 16, 2015, 07:40:50 PM
And a higher rate means more growth, right?
If you want to look at economic growth, you really need to look at nGDP.

Interest rates are seen (incorrectly, in my opinion) as 'indicators' of policy which can be used to secure proper growth. For instance, after the stock market crash of 1987, the Fed lowered interest rates in order to keep banks trading and stop it affecting the real economy. However, in times of prosperity it's not unusual for the Fed to raise interest rates to curb lending and stop the economy from 'overheating'.

Ah, that makes a bit more sense.