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Inflation

The makers of economic policy fear few things as strongly as inflation. If inflation sets in, it affects everyone—corporations, suppliers, workers, employers, pensioners. Mostly, the effect is negative. The official tenet of most central banks is to keep inflation low. So if inflation is rising, as measured by the consumer price index (CPI) in the U.S., the Federal Reserve will most likely be forced to raise interest rates, which will cool economic growth. Investors are well aware of this relationship, making the monthly report of the CPI one of the most-watched numbers on Wall Street.


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