By News Channel 11

Published: June 17, 2009

A few months ago, I wrote about the dangers of deflation. In many ways, deflation is more of a threat to the economy than inflation. It would seem deflation worries have now subsided. But Wall Street’s big stock rally has cooled in recent weeks, with most signs pointing to increased worries about inflation. This is still a major threat, particularly down the road once the economy is off its knees and on its feet. But for now, this story from USA Today finds the inflation threat is being held in check… for now (http://www.usatoday.com/money/economy/2009-06-17-consumer-price-index_N.htm?csp=34):

By Christopher S. Rugaber, AP Economics Writer
WASHINGTON — Consumer prices rose less than expected in May, fresh evidence that the recession is keeping inflation in check.
The Labor Department reported Wednesday that the consumer price index rose a seasonally adjusted 0.1% last month, below analysts’ expectations of a 0.3% rise.

Excluding volatile food and energy costs, so-called “core prices” also increased 0.1%, matching expectations.

In a second report Wednesday, the Commerce Department said the current account trade deficit, broadest measure of the nation’s trade, dropped to $101.5 billion in the first quarter, a 34.5% decline from the deficit in the fourth quarter. It was the lowest current account deficit since the final three months of 2001, when the country was mired in the last recession.

Low inflation enables the Federal Reserve to keep its key short-term interest rate near zero, where it has been for months.