No inflation?

Despite rising costs of fuel and food products, the Fed lowered the prime rate again. The Fed adjusts the prime rate to check inflation. I have been told by those in the know that consumer products like gasoline and food products are exempt from inflation measures. My question is "What is used to measure inflation"? Anyone know?

Why? Because they are inflationary.

Search for the core inflation. Maybe you can find a description. It's 4 a.m. I need to sign off now. Sorry I couldn't be more help.

inflation is defined as being a general increase in the price of goods <and services?>

There may be different indices. We've obviously got one here in the UK which includes food. See here for example : http://news.bbc.co.uk/1/hi/business/6945557.stm

edit to add another link too : http://www.statistics.gov.uk/cci/nugget.asp?id=19

However, the inflation consumers are seeing in supermarkets is becoming painful, but core inflation does not take into account gas prices and--I believe--housing costs.

You lower interest rates to make it easier for banks to lure would-be debtors into taking out loans. Through fractional reserve banking, this is how banks "create" money out of thin air.

You raise interest rates for the opposite purpose. You usually do this to cool down an "overheated" economy where inflation may become a problem.

It's not a perfect system, because fractional reserve banking guarantees that there will be perpetual inflation for as long as banks have the ability to create money. Inflation could be considered a very regressive form of taxation, that redistributes wealth from the bottom to the top of the income ladder, simply because people who make 10,000,000/year don't feel inflation like you or I.

The Federal Reserve is facing stagflation, but no corporate economist will admit this. Stagflation is when both inflation is a problem and unemployment becomes a problem. This last occurred in the 1970s with the oil shocks. In fact, it seems oil shocks are the only thing out there that causes stagflation.

When it lowered the discount rate like it just did, it simply exacerbated the double-digit inflation now seen with food and other consumer goods. Nevermind gas and housing.

"Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 7% per year...

The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival...

Aside from the changed weighting, the average person also tends to sense higher inflation than is reported by the BLS, because of hedonics, as in hedonism. Hedonics adjusts the prices of goods for the increased pleasure the consumer derives from them. That new washing machine you bought did not cost you 20% more than it would have cost you last year, because you got an offsetting 20% increase in the pleasure you derive from pushing its new electronic control buttons instead of turning that old noisy dial, according to the BLS...

Then there is "intervention analysis" in the seasonal adjustment process, when a commodity, like gasoline, goes through violent price swings. Intervention analysis is done to tone down the volatility. As a result, somehow, rising gasoline prices never seem to get fully reflected in the CPI, but the declining prices sure do."

http://www.shadowstats.com/cgi-bin/sgs/article/id=343

This is a great site that keeps up with inflation using the criteria that the BLS use to use. That was before the government decided to screw the retirees out of their Social Security COLAs.

http://www.shadowstats.com/cgi-bin/sgs?