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CUNAs Hampel analyzes inflation pressures for IFox BusinessI
WASHINGTON (4/25/11)--Rising gas prices is a short-term phenomenon that is not enough to derail the economy, Credit Union National Association (CUNA) Chief Economist Bill Hampel told Fox Business during an interview Friday afternoon. In a segment entitled "Is inflation a real threat to economic recovery," Hampel provided an analysis of the inflationary pressures Gas prices are increasing to as high as $5.50 and $6 in Florida last week. "These work like an extra tax [on Americans]. Fortunately, gas is a small portion of all the prices we pay. It's the only one we see in big letters," he said, adding there is a psychological impact that may lead households to believe inflation is rising. "That's the portion of the household budget that is draining away. It's nasty, but not enough to derail the economy," Hampel said. That expectation of inflation just around the corner is "another hurdle to work through" and it "will slow the economy this year, but not enough to derail us back in a double dip recession," Hampel added. "Consumers are smarter than we think. The short-term inflations expectation by households is through the roof, but their long-term inflation expectations are not." Will the economy slow down? There are a lot of negative reports, but "the economy in the past six months has been building momentum," he said. "The employment situation is picking up. Consumers haven't been spending, but they have a lot of pent-up demand for cars and other durables, and businesses have a pent-up demand for capital goods." He noted households are paying down debt. He also noted the job market is picking up steam. After a loss of nine million jobs the past one and a half years, the nation has picked up another 1.5 million jobs. Hampel also addressed when the economy could be sustainable again without government stimulus. The Federal Reserve's policy making board that sets the fed target funds rate--the Federal Open Market Committee--will meet Tuesday and Wednesday. "I don't think the Fed is going to raise rates," he said. For that to happen, he added, the nation would need for the unemployment rate to go down toward 7.5%, and inflation would have to rise and stay for an extended time. He does not expect a rate increase before fourth quarter 2011 or first quarter 2012, he told Fox Business.
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