Month to Month Inflation
Year Over Year Inflation
Case in point, the annual rate of inflation over the past 5 months has been 2.5%, very close to the 2% stated inflation target of the Federal Reserve.
But they are still aggressively raising rates:
Do Americans understand what is happening with inflation in this country? This is an important question, because the public’s perception can influence national policy and political choices. Before the midterm elections one month ago, 87% of likely voters told pollsters that inflation was extremely or very important in deciding their vote.
Let’s take a simple example of what most Americans see most in the news, and compare this with the data that economists, and journalists who cover the U.S. economy, are looking at.
This week our government released the November data for the Consumer Price Index, and the headline number was 7.1%; which was down from 7.7% last month, but still a very high rate of inflation for the United States. The phrase, “highest levels since the early 1980s” has accompanied much of the reporting for the last few months.
But these numbers are, in some very important ways, out of date.
It’s true that prices as measured by the Consumer Price Index (CPI-U) in November of this year were 7.1% higher than a year earlier.
But if we look at the five months that we have just experienced (July through November), the bigger news is really how much the rate of inflation has been coming down.
For these five months, annualized inflation has been just 2.5%. Just to be clear: That 2.5% is not the increase in prices over these five months (July through November). It’s the increase in prices that we would have if this inflation over five months continued for a year.
Month to month inflation is not a good metric, the fluctuation in energy prices makes it rather unreliable, but a 5 month stretch of relatively low inflation, that is significant and adjustments should be made.
These adjustments won't be made, but they should be made.
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