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Retirement Weekly: Why retirees should be wary of rising inflation

This post was originally published on this site

The Federal Reserve maintains a publicly stated 2%target for inflation. The rationale for it goes something like this: 2% inflation, coupled with normal economic growth of 2% to 3%, would lead the Fed to maintain short-term interest rates in the range of 4% to 5%. Then, if a bad recession hits, the Fed would have ample room to lower rates in an attempt to spur growth.

This works because when interest rates go down meaningfully, the cost of capital goes down. Companies then invest more in technology, equipment, and other means…