The Fed is caught between some progress on risks and no inflation pressures

The decision the Fed will make in two weeks became more difficult last week. The inflation data came in much lower than has been the case in the last three months. The PPI dropped by 0.3% in September which took the year-over-year increase to 2.0% from 2.4% for the core rate. The CPI was unchanged for the month. This data confirms the concern the Fed has had about the inability to get inflation to rise. The Fed is concerned inflation is not rising when the economy is expanding and could drop to negative levels, should the economy slip into recession. Deflation is the worst environment for consumers and businesses to operate. This lack of inflation could drive the Fed to lower managed rates at their next FOMC meeting on October 29-30.