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Recent articles related to the financial crisis.
Wednesday, November 19, 2008
by Dollars and Sense
The CPI fell 1% last month--the biggest fall on record--signaling the possibility of a "deflation-type scenario" (as one economist put it):U.S. Economy: Consumer Prices Fall, Raising Deflation Danger
By Bob Willis and Timothy R. Homan
Nov. 19 (Bloomberg) -- The cost of living in the U.S. fell by the most on record and construction began on the fewest homes ever last month, evidence the economy is in the worst recession in at least a quarter century.
The consumer price index plunged 1 percent last month, the most since records began in 1947, the Labor Department said in Washington. Commerce Department figures showed housing starts tumbled to an annual rate of 791,000, indicating the industry's contraction may extend into a fourth year.
Today's CPI report signals deflation, or a prolonged price slide, may become another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Deflation could worsen the economic downturn by making debts harder to pay off and countering the impact of Fed interest-rate cuts.
"The economy's really just in horrific shape," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. Fed officials will "take rates as low as they have to" to avoid "a deflation-type scenario, which now all of a sudden is very possible."
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Labels: CPI, deflation, financial crisis, recession
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11/19/2008 12:54:00 PM 
