Lower Credit-Card Fees in the New Year?
Nov. 14, 2006 — -- Might be time to dust off your "Inflation's Dead" party hat as today's Producer Price Index (PPI) pretty much buries the idea that prices are going up fast enough to deplete the buying power of the dollar.
According to the Labor Department, wholesale prices dropped by 1.6 percent in October, matching the largest ever one-month drop in the history of the report (October 2001).
If you pull out volatile food and energy prices -- getting to what economists call the "core rate" -- prices dropped by 0.9 percent.
Last month's big downward moves were led by price cuts in gasoline as well as cars and trucks.
What's interesting here is the trend that's becoming evident in the numbers. A look at the PPI during the last six months shows producer prices peaking in June and then falling steadily through October.
Most economists see this as a downward trend.
It's a good hint that credit cards and home-equity loans might be getting a bit less expensive starting early next year.
This report is one of many that paint the overall inflation picture for the country. It has a big effect on what the Federal Reserve decides to do with interest rates.
The nation's central bank had been raising rates to fight off inflation threats during the last two years. Now that we're seeing some evidence that prices might actually be falling, the governors have reason to start easing off that key federal interest rate that has a direct effect on short-term, revolving credit prices.
If you're looking for relief from high rates, you'll probably have to wait until early next year because the Fed only meets once more this year.
More immediately, though, this news is likely to push the stock market higher today.
This is good economic news, but isn't the complete picture. The PPI is just one of two big inflation numbers out this week.
If Thursday's look at retail prices (the Consumer Price Index) also shows price relief, expect a big rally on Wall Street and headline rumblings that the Fed should cut rates -- and soon.
Popular Reads
ABC News Live