QE3 Despite Drought
07/30/2012 | | core inflation, drought, groceries, headline inflation, mid-west drought, QE3, Quantitative Easing 3, wages and inflation
Despite inevitably higher food prices starting this fall, stemming from a severe drought, the Fed will ignore this when they launch a third round of Quantitative Easing in September. It’s because the drought is a short-term event that will probably reverse itself in ‘13. Moreover, groceries are barely 7% of the average family budget, and since wages are not tied to inflation this price rise won’t become permanent.