An introduction to the analysis of the annual inflation rate

Jump to Current Inflation Table The inflation rate plays an important role in determining the health of an economy. Countries with extremely high inflation rates are said to have hyperinflation and when this occurs the economy is often near collapse. But even moderate inflation can rapidly erode purchasing power and creates uncertainty as businesses have more difficulty estimating future costs. Usually, high inflation rates also correspond to high interest rates as lenders need to compensate for the decline in purchasing power of future interest and principal repayments.

An introduction to the analysis of the annual inflation rate

Inflation in began with 1. Although monthly inflation for the first two months was 0. But annualizing that rate would still result in 4. Fortunately the first quarter is usually the highest and then typically inflation decreases and often ends in deflation in the last quarter of the year.

Monthly inflation was negative disinflationary every month from July through November except September when it was slightly inflationary 0. Inflation in started at 1. September fell back to 1. November bumped up a bit to 1.

This was the beginning of the Quantitative Easing program and later called QE1. In the long run steady low inflation rates benefit everyone as people can accurately judge their future costs and make sound business decisions. But the government prefers a higher inflation rate so it can repay its debts with "cheaper dollars.

This is what the government means by "stimulating the economy" i. The obvious long term effects are a society with more debt than it should have and thus we see crashes like we saw in Then the government has to "do something" so it prints more money to fix the problem it created by printing money in the first place.

For more detail see: Most of these securities were virtually worthless at this point. But just a few months earlier they were considered part of the larger money supply. So in effect the FED bailed out the owners of this junk debt and pumped up the money supply at the same time by converting worthless junk into "valuable" greenbacks.

In December Ben Bernanke began "tapering" which slowly shut off the flow of easy money and by October the flow was totally stopped. Edward Griffen reminds us that the Federal Reserve is really just a bank cartel and it primarily has its members interests at heart.

So monetizing worthless junk paper and bailing out the banks that held them makes perfect sense when looked at in that light. Operation Twist was announced on September 21, and it was designed to buy long term Treasury notes on the open market while simultaneously selling short term notes.

This would have the effect of driving long-term interest rates down. To some extent this has happened but probably not to the extent that they had hoped.

So often you will hear different numbers quoted in the popular media because they usually use the "Seasonally Adjusted" numbers. By looking at the monthly inflation rate we can see the various components that make up the annual inflation rate.

The annual inflation rate is made up of the 12 most recent monthly rates. So when a small or negative deflation monthly rate is replaced by a large positive monthly rate we can see a significant jump in the annual inflation rate in a single month.

An introduction to the analysis of the annual inflation rate

Conversely if a large monthly inflation rate is replaced by a smaller one, inflation will decrease. For instance, February had a monthly inflation rate of 0.

Annual inflation actually deflation went from But the month before in Januarywe saw a fairly large 0. See the current MIP to read more about what we are predicting for next month and the next year. See the Misery Index for the combined effect of Unemployment and Inflation.The table of historical inflation rates displays annual rates from to Rates of inflation are calculated using the current Consumer Price Index published monthly by the Bureau of Labor Statistics.

BLS data was last updated on August 10, and covers up to July The next inflation update is set to happen on September 13, INFLATION ANALYSIS Bangkok November 26, Jan Gottschalk, TAOLAM. This activity is supported by a grant from Japan. WORKSHOP ON MONETARY AND Annual CPI Inflation Rates () Developing Asia Myanmar.

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Alternative Price Indices: The GDP deflator. 12 • Index of the price level for. For example, if the inflation rate is 2 percent, then a pack of gum that costs $1 in a given year will cost $ the next year. As goods and services require more money to purchase, the implicit value of that money falls.

Introduction The political, economical and social events from a certain period of time have a positive and negative effect on the annual inflation rate IPC evolution, with direct consequences on the population standard of living.

Chapter 15 Inflation A European investor lives near to one of his country’s borders. In Country A (where he lives), an 8% interest rate is offered in banks, and the inflation rate is 3%.

But there is an extreme form of inflation called hyperinflation. This occurred in Germany between and , and more recently in Zimbabwe between and In November of , Zimbabwe had an inflation rate of billion percent. In contrast, in , the United States had an average annual rate of inflation of %.

What is the Current U.S. Inflation Rate?