The monthly data on import and export prices typically do not get much attention. This month should be an exception. Non-oil import prices rose by 0.7 percent after rising by 0.5 percent last month. This suggests that the fall in the dollar is finally showing up in higher import prices. The Fed is now facing the decision in very concrete terms, will it accept this inflation and keep lowering interest rates to try to offset the impact of the housing crash, or does it try to keep inflation within its comfort zone at the cost of letting the economy fall into recession.
--Dean Baker
