The low-inflation environment is also fueling bets that the Fed could push off any interest rate hikes.
If the Fed raises rates too soon, it could raise deflationary pressures, which could send the economy into a spiraling decline as cash becomes more valuable, prices continue to fall and Americans withhold spending to buy something cheaper tomorrow. [ETFs for a Deflationary Period]
The Fed is targeting an inflation rate of about 2%. Additionally, looking at the Fed’s preferred inflation gauge, the Commerce Department’s consumption expenditure price index, inflation has undershot 2% for over two-and-a-half years.
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