ISU Economist: Disinflation a Good Sign, But There's Still a Ways To Go

FED federal reserve of USA sybol and sign.

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AMES, Iowa -- Federal Reserve Chairman Jerome Powell says the US economy is in a period of disinflation.

"He's saying that the rate of inflation is becoming less, which means we're still experiencing inflation but not as rapid as we have," says Iowa State University Economics Professor Peter Orazem.

He says while the disinflation a good sign, it doesn't mean the national economy is out of the woods.

"So a year ago December the rate of inflation was 7.1 percent. The overall rate of inflation is down to 6.4 percent, but they (the Federal Reserve) still have got a long ways to go before they reach their target," Orazem says.

He says there's no question that inflation is playing a role in the US economy, which may prompt more interest rate increases .

"Whether or not they've actually reached the peak is a little bit of concern, I mean if you look at the rate of inflation it's still higher than the interest rate. From an historical perspective that's considered still relatively expansionary monetary policy. I think they've still got some more rate hikes to go before they actually reverse this," Orazem says.

While the current inflation rate of 6.4 percent is down from last June's peak of 9.1 percent, it's still above the Fed's target of two percent.

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