Weekly Market Insight • Inflation, Year over Year; Consumer Pric e Index for All Urban Consumers • 01/23/12

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Inflation, Year over Year
Consumer Price Index for All Urban Consumers
January 23, 2012
Sources: U.S. Bureau of Labor Statistics, Grubb & Ellis
Inflation remains subdued despite an uptick in recent economic indicators such as the labor market, industrial production and even residential construction. The consumer price index was flat in December for a second consecutive month while core prices, which exclude food and energy, rose just 0.1 percent. On a year-over-year basis (see chart), the CPI rose 3.0 percent from December 2010 while core inflation was 2.2 percent, right around the Federal Reserve’s informal comfort range of 2 percent. Even with the improving economy, long-term inflation expectations are low according to the Cleveland Federal Reserve, which says that the public expects inflation to average just 1.39 percent annually over the next 10 years. Low levels of inflation and expected inflation during a period when the economy is improving will provide cover for the Federal Reserve to keep interest rates low and monetary conditions accommodative at least through next year. For commercial real estate, sustained low interest rates should provide some room for capitalization rates to move lower over the next year.
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

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Robert Bach
Senior Vice President, Chief Economist

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© 2012 Grubb & Ellis, all rights reserved.

About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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