2nd Highest Inflation in 26 years: Bernanke reiterates the Fed's aim for "price stability"

The Labor Department reported today a 1.1% rise last month in consumer prices. This was the second highest increase in 26 years (exceeded only by a 1.3% rise after Katrina caused by the tremendous boost in energy prices). Even after subtracting food and energy, the "core" inflation increased 0.3% in June. Prices increased 5% in the last 12 months and 2.4% for "core" over the same period. This "core" figure is well outside the Fed's "comfort" threshold (1.5% to 2%) for inflation.

All of this seemed to start turning the big gears:

• The U.S. Dollar Index reversed two previous days of losses to close equal to the low of May 22nd. The dollar moved strongly up from its historic low of 71.55 reached yesterday to 72.3 now. It will have to move up past July 8th's high of 73.39 in order to move back into a bullish trend.
• Fed chairman Bernanke said today that inflation "is too high" and said (again) that the Fed's aim is to achieve price stability. But he also stated that the increase in energy and commodity prices were due to "factors out of the control of the Federal Reserve." What utter nonsense! Crude oil is priced in dollars - much of the price increase is due to the decrease of the U.S. Dollar.

Let's hope that this time, Bernanke will live up to his words.