Issue link: http://palletcentral.uberflip.com/i/522141
20 PalletCentral • May-June 2015 palletcentral.com actually led to the decline in the Consumer Price Index (CPI). Inflation has been well below the Fed's goal of 2% since July. Even with a bounce in February, overall inflation on a year over year basis is near zero. Consumer Price Index The other complicating factor is the sharp rise in the U.S. exchange rate. Europe is struggling with deflation and limited growth. The European Central Bank has just begun its program of Quantitative Easing (purchase of long term bonds, which the Fed stopped doing last year). Their actions have driven some high quality European government long-term bonds rates below zero. Yes, negative interest rates on Swiss and German two-year government bonds. With U.S. interest rates expected to go higher, capital has been flowing into the U.S. financial markets causing the sharp decline in the Euro. The Euro Good news for the consumer and inflation, but not so good for the manufacturing sector. This will drive down prices in the U.S. for imported goods, but make U.S. exports more expensive in the offshore markets. ECONOMY Wage pressures will build and the Fed will boost interest rates later this year.