The basket of goods we trace prices on includes goods that are in markets with structural market factors forcing prices up (food grains--weather; oil and gas--supply; steel--tarrifs etc.). Nothing to do with inflation, we have deflation right now and have had it for around two years and the rate of deflation is accelerating.
" Besides lowering interest rates, how does the fed actually increase the money supply? If they are giving away "freea" money...who do they give it too???"
That is of course the real question. And Richard has given you the fed's best answer--they print money and buy government bonds, usually from bank reserves, on the assumption that the bank with an implicit cost of the cash in its reserves with no revenue from the cash will then lend it out; or the marketplace, on the assumption that the recipient of the proceeds of bond purchases will be under similiar pressure to invest or spend. That is not however what investors are doing with excess cash so that is not going to happen either.
I don't know who coined the term "helicopter money" but it's a wonderful term because it forces people to think about the problem the fed has in giving away money. The real way they do it is credit every checking account in America with $10,000--but if they did that, no one would ever again use the dollar for money; it would defeat their purpose.
Bottom line? Deflation is here and there is nothing the fed can do about it. What do we do? Conserve cash; be sure it is located in a secure place: Few banks are worthy; few money funds are safe; some T-Bill only funds are ok; best is Treasury Direct investments in T-Bills.
I just signed up for this. Not a bad deal considering that many banks are now paying ~.50-.75% on Savings Accounts. You can do better than that with a 4-week T-bill.