"OPINION HAS CAUSED MORE TROUBLE ON THIS LITTLE EARTH THAN PLAGUES..." Voltaire.

And lately, there have been a lot of opinions about inflation being voiced from Fed officials, respected economists, and the media. But what does all this talk really mean for our economy and home loan rates? Here's what you need to know.
On Friday, the Consumer Price Index (CPI), which measures the prices US consumers pay, came in lower than expected for January. The chart below shows the year-over-year headline CPI at 2.6%, below expectations of 2.8%.  What's more, when volatile food and energy are removed from the equation, the "Core" Consumer Price Index was actually negative - and the last time that happened was 28 years ago.

So, if the CPI Report shows that inflation is currently non-existent, why are so many people expressing concern? The reality is that the factors which are currently restraining inflation pressures could easily swing the other way.
In fact, Kansas City Fed President Thomas Hoenig recently said, "Fiscal policy is on an unsustainable course.  The US Government must make adjustments in its spending and tax programs.  It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis." And part of the crisis Mr. Hoenig is warning of is the possibility of hyperinflation, which occurs when prices rise so quickly that a currency becomes worthless. 
Hoenig recently reminded us that he has a framed picture of a 500,000 German mark bill in his office...which would have purchased a home in 1921, but due to sudden inflation, wouldn't purchase a loaf of bread just two years later. Adding to the inflation talk, recent Produce Price Index Reports, which measure inflation at the wholesale level, have shown a trend higher in wholesale inflation.  January's report, for example, was significantly higher than expected, due to rising energy costs.