U.S. Consumer Prices Remain Steady

Just days ahead of a Federal Reserve policy meeting, the Labor Department said the Consumer Price Index, rose 0.3 percent in August, compared with 0.3 percent in July, on a seasonally adjusted basis. We can see that Consumer Prices remained mostly flat in August. What is more, inflation is so tame that the economy has the risk of deflation. Compared with other years, this is the lowest pace in more than 50 years. Because short-term interest rates close to zero, Federal Open Market Committee voted to use proceeds from the Fed's mortgage bonds to buy long-term Treasury Securities. Under the risk of deflation, many economic strategists gave their opinions. They expected the Federal Reserve to start a second round of quantitative easing aimed at increasing the excess reserves of banks, and thus encouraging more lending. They also expect them to continue their "communications strategy" to convey the message that the central bank is ready to continue to provide support. Fed officials said deflation was "not a significant risk, and they would strongly resist deviations from price stability in the downward direction". But, before doing that, they want to wait out the data to see what happens.