CPI subdued in October, energy costs account for almost all of the increase

Via BLS:

The CPI increased 0.2% in October. Year over year the index increased 1.2%. Energy costs was the major factor in the increase as the gas accounted for almost 90% of the increase. The food index rose slightly in October with the food at home index unchanged.Over the last 12 months, the index for all items less food and energy has risen 0.6%, the smallest 12-month increase in the history of the index, which dates to 1957.

This is part of the Federal Reserves justification for QE2.  While we have been suggesting that printing money will lead to inflation, the Fed is hoping that we are right and that the inflation will combat the deflationary trends which are already at work. 

The only problem with that justification is that lower prices on goods is what you want in a recession.  Second, once inflation is out of the bag, it is not easy and painless to put back in.  The Fed says they have the "tools" to exit their balance sheet purchases via repurchase agreements, but if the market is broken, it is not so easy to exit, as the mortgage companies can testify.


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