Remember when there was a ton of worry about inflation? The worry-warts were talking about the federal reserve printing all of this money, which was going to lead to inflation. We were going to be 1930s Germany. We needed to pay off debt and stop government spending. Well, inflation as a rule has held steady. Groceries seems to be steadily increasing, but for the most part inflation has been held in check.
(The worry-warts forgot about the fact that we were in a recession and had high unemployment, which means that there was no demand. It is hard to have inflation with no demand for goods and services.)
This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.0%, and core CPI rose 2.1%. Core PCE is for June and increased 1.8% year-over-year.
These measures suggest inflation is now at the Fed’s target of 2% on a year-over-year basis and it appears the inflation rate is slowing. On a monthly basis (annualized), two of these measure were well below the Fed’s target; trimmed-mean CPI was at 1.3%, Core CPI at 1.1% – although median CPI was at 2.5% and and Core PCE for June was at 2.5%. Based on initial data – and comparing to the increase in August 2011 – it is very likely that the August report will show a further decline in the year-over-year inflation rate.