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A Note To Inflation Hawks

There is practically no inflation right now, despite the Federal Reserve's proactive open-market operations. According to Reuters, the Core PCE (Personal Consumptions Expenditures) Price Index, the favored inflation guage of the Federal Reserve, has fallen to a 3 and 1/2 year low of 1 percent.

With that said, this is probably the most textbook example of the need for fiscal and monetary stimulus. Although recent comments from the San Francisco FRB president signal that the Fed's open-market operations could tighten in the summer following decreases in unemployment, the combination of a 1% inflation (not even remotely close to the 2% Fed inflation target) and an unemployment rate of 8.4% (significantly higher than the NRU) shows that unemployment is more of a problem right now.