World Perspectives
energy

Higher Inflation on the Way: What Will the Fed Do?

Food inflation for 2012 was up 1.8 percent last year, compared with 4.7 percent in 2011. Gasoline prices rose 1.7 percent in 2012, following gains of almost 10 percent in 2011 and roughly 14 percent in 2010. The Labor Department states that the consumer price index (CPI) has risen 1.6 percent in the 12 months ending in January. That's down from the 2.9 percent rate from a year ago. So why would higher inflation be on the way? Two reasons: energy and the Fed.

First, energy. For the later part of 2012 and into January, falling energy prices offset gains in most other major categories. Now energy prices are starting to spike, up 47 cents -- or 14 percent -- since last month, so we are likely to see overall prices move higher as well when...

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