(Bloomberg) – The low rate of inflation is making the Federal Reserve Board nervous, and part of the problem is the sluggish rate of increase in health care costs.
Consumers would normally think that controlling health care costs is a good thing.
Investors are showing doubts about whether the Fed will succeed in rekindling inflation and are moving money out of exchange-traded funds tracking U.S. inflation. Traders pulled $524.6 million in the five days ended April 7 from the iShares TIPS ETF, the largest fund tracking Treasury Inflation Protected Securities. That erased all of the inflation bets accumulated in March, when the fund saw inflows of $326.8 million.
February’s 1.1 percent core PCE reading matched January’s as the lowest since March 2011. Including volatile food and energy costs, PCE inflation, the Fed’s preferred gauge, was even weaker, slowing to a 0.9 percent year-over-year pace, less than half the Fed’s 2 percent goal.
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