Don't let nonexistent wage growth get in the way of an opportunity to spend. Retail sales jumped in March, outpacing expectations and even the numbers for snowbound February were revised higher. Just to set the stage, household incomes aren't growing, unemployment is at 9.7 percent and consumers are ramping up spending. And to think some forecasts called for the savings rate to reach double digits. Please!
The party isn't going to end on account of interest rates or inflation anytime soon (although that will eventually be the case). The Consumer Price Index barely registered for March with the headline CPI up 0.1 percent and core prices unchanged. The headline CPI, while up 2.4 percent year-over-year is up just 0.8 percent in the past six months and 0.2 percent in the past three months. So the Fed still has more excuse to keep rates at record lows. Ben Bernanke speaks to the Joint Economic Committee in Congress this morning and he will undoubtedly stick to the well-worn script of "we don't see inflation, we're not sure the economic recovery is sustainable, housing is still weak, so we need to keep rates low." That means continued pain for savings accounts, certificates of deposit and other fixed income instruments.