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According to this article on MSNBC.com, the average salary range increase for this year is 3.5%.  This doesn’t exactly keep up with the government’s released figures of 5.2% CPI-U inflation rate.  Essentially, the average salary worker is losing $17 per $1000 earned to inflation this year.  For someone making $40,000/year that translates to a loss $680/year to inflation!

I don’t think the fed has any option but to continue to raise interest rates.  The next fed meetings are on

  • June 28/29 2006
  • August 8 2006
  • September 20 2006
  • October 24 2006
  • December 12 2006

It seems to me that the fed should raises rates in the following manner to control inflation:

  • June 0.25%  —> new rate at 5.25%
  • August  0.25% -> new rate at 5.5%
  • September —–> pause and stay at 5.5%
  • October 0.25% –> new rate at 5.75%
  • December ——–> pause and keep rate at 5.75%

Of course with an election looming it’s anyone’s guess about the order but I see interest rates rising to 5.75% by the end of the year.