Inflation Outlook Remains Stable
In September, the headline Consumer Price Index (CPI) increased by 0.09 percent after falling 0.20 percent in August. Rising domestic demand in August helped push up the Consumer Price Index Core by 0.14 percent in September, compared to last months’ 0.01 percent increase. However, industrial production has caught up and consumer demand has cooled, suggesting a moderating inflationary climate in coming months. Slowing global economic growth and falling oil prices provide further support for that outlook.
READ MOREOil Prices Neutralize Inflation
Falling prices caused by an oil surplus are offsetting inflation pressures created by an overall increase in consumer demand and a decline in production.
READ MORESlight Price Pressures Visible
As the economy continues its recovery, inflation plods along at a low, positive rate. July saw the broad CPI increase just under 0.1 percent. Core inflation, excluding food and energy, also saw modest monthly growth of 0.1 percent. However, labor market tightening and real disposable income growth have increased the upward pressure on inflation and inflation expectations.
READ MOREUse Forecasts for Trends Only
Inflation forecasts have tended to capture the general direction and perform best in periods of economic stability.Inflation forecasts have tended to capture the general direction and perform best in periods of economic stability.
READ MORESpending Habits Shape Inflation
The price changes felt by individuals vary depending on lifestyle.
READ MOREStrong Dollar Dampens Inflation
A strong dollar helps hold down the prices of imported consumer goods, partially offsetting core consumer services inflation.
READ MORECan The Fed Tame Inflation?
The Federal Reserve’s quantitative easing policy ignited inflationary fears, but inflation as measured by the Consumer Price Index has remained low for several years. The QE program began in late 2008 as an attempt to stimulate the economy out of recession. Three rounds of quantitative easing have totaled $3.5 trillion.
READ MORERents Augur Inflation
Plummeting vacancies in the rental market and increased shelter costs point to an eventual upturn in the general price level. For now, inflation remains persistently low.
READ MOREMarginal Gains
Corporate profits as a percentage of GDP are at an all-time high. Commodities prices have decreased over the last two years, while price inflation remains mostly flat.
READ MOREIn The Shadows
The headline data again suggest next to no change in prices. November actually saw declines across several measures of inflation. A strengthening economy coupled with a sustained influx of money from the Fed has economists shrugging their shoulders and squawking, “Where’s the inflation?”
READ MOREEnergy Déjà Vu
Declines in gasoline, fuel oil, and natural gas held down overall prices. But continued economic growth risks rising prices.
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