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Bernanke Says Inflation Remains Low. Is He Right? You Decide.

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This morning’s Wall Street Journal reports that companies contending with rising commodity prices are now stockpiling rubber tires, cotton clothing and other goods in an attempt to protect themselves from rising inflationary pressures.

Indeed, the prices of wheat, corn, and soybeans have skyrocketed. Copper and tin have been slamming record highs.

As a result, some economists say, Federal Reserve Chairman Ben Bernanke may soon regret the decision to implement QE-2.0.

“The idea was to avert deflation and to bring back just a tiny bit of inflation,” says Dr. Ed Yardeni. “The unintended global consequences seem to be hoarding, hyper inflating commodity prices, food riots, and revolutions,” adding, “The easy-going folks at the Fed may have to change their sanguine assessment of the inflation situation fairly soon.”

But, apparently, not anytime too soon.

Today, in prepared remarks to the National Press Club, Bernanke reportedly shrugged off a recent increase in commodity prices, saying overall inflation remains “quite low.”

The Fed Head said that inflation was only 1.2% in December in the US. He noted that underlying inflation, which strips out volatile food and energy costs, was just 0.7% in 2010, compared with around 2.5% in 2007, before the recession began.

Miller Tabak’s Peter Boockvar listened to the speech and delivered his own analysis: “Looking at 2010 CPI stats is classic rear view mirror economic analysis,” the strategist said, “and it seems that the Fed won’t worry until higher CPI readings are plastered on their foreheads."
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