You are here

Fed's inflation headache to intensify as Amazon cuts food prices

[NEW YORK] Amazon's plans to cut prices at Whole Foods is great news for shoppers, but not so much for Federal Reserve officials wondering whether they'll ever hit their 2 per cent inflation target.

A low unemployment rate is supposed to boost inflation, or so the economic theory goes.

One possible reason it's not happening, according to the minutes of the central bank's latest meeting in July: "Restraints on pricing power from global developments and from innovations to business models spurred by advances in technology."

Chicago Fed President Charles Evans earlier this month mused that "people are utilising newer technologies, competition is emerging from unexpected places - not necessarily your nearest competitor but somebody else - and that could lead to reduced margins and downward price pressure for some period of time."

BLOOMBERG

sentifi.com

Market voices on: