Inflation and staying ahead of it

By Jason Kestler

Kestler Financial Group, Inc.


Although it isn't much of a factor now, at some point inflation could be front and center with all of the cheap cash that is available currently.

In fact, Dallas Fed Bank President Richard Fisher recently said that "excessive monetary accommodation might only add a further dosage of angst, fueling fears of inflation." In addition, Minneapolis Fed Bank President Narayana Kocherlakota stated that the easy Fed monetary policy could push inflation to 2.3 percent next year, which would be above the Fed's comfort zone of 2 percent.

One of the best ways to monitor inflation is by monitoring the Consumer Price Index and the Producer Price Index. The CPI measures inflation at the consumer level, or rising costs that are passed on to consumers. The PPI, on the other hand, measures inflation at the wholesale level, or costs that producers are experiencing.

Both reports are released at the beginning of each month. And, depending on what the data says, they can both impact home loan rates.

That's because any hint of inflation can serve to spook bond investors -- causing both bonds and home loan rates to worsen, since inflation can reduce the value of fixed investments like bonds. This is one story to keep a close eye on in the weeks ahead.