Economics inflation rate/ COLA question…?

One Response to “Economics inflation rate/ COLA question…?”

1. Brian H says:

   November 20, 2010 at 12:58 pm

   I A family paying $600 a month w/ a fixed rate on a 30 year mortgage would be happy. If inflation goes up higher than expected, that means that your money is worth less. While overall this isn’t good, it means that the $600 you’re paying after the 6% inflation is going to be worth a lot less than the $600 you had in your pocket before inflation hit.

   II The bank gets the other end of the deal. They have a loss. They’re getting the same amount of money every month, $600, but now its worth less because inflation took away some of the purchasing power.

   III Workers whose wage contracts have COLA tied to CPI won’t have an impact. If CPI jumps up 6%, the COLA will go up 6%.

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