Replies to post #116925 on Tornado Alley (PROG)

[StephanieVanbryce]

A Record Low for Inflation

November 17, 2010, 10:20 am

Score one for the Federal Reserve, which some economists have accused of jumping the gun on deflation worries.

According to a government report released today core inflation — that is, the change in the cost of a basket of consumer goods, excepting the volatile categories of food and energy — was at its lowest level on record last month.



Core inflation was at zero percent for the third month in a row, and the year-over-year change, at 0.6 percent, registered its lowest measure since the government began collecting such data in 1957.

Now, since core prices are still higher than they were last year, deflation of course has not materialized. But the downward trend does seem to bolster the case for worrying about negative price changes.

“Core inflation junkies (including the Fed leadership) will no doubt cite the extremely low levels of core C.P.I. as a powerful piece to defend the QE2 policy,” wrote Jay Feldman, director economics at Credit Suisse, in a note to clients, referring to the Fed’s recent decision to pump more money into the economy. “The headline inflation camp will respond by claiming that inflation is only worrisomely low if you don’t drive or eat. But with headline inflation at just above 1 percent, and record low readings in the core, we suspect the doves have the upper hand this morning.”

http://economix.blogs.nytimes.com/2010/11/17/a-record-low-for-inflation/

[StephanieVanbryce]

Disinflation Confirmed

December 5, 2010, 11:46 am

One of the things you often hear is the claim that statistics showing falling inflation are just about housing. Via Mark Thoma, the San Francisco Fed has done the homework: the same downward trend is there if you purge housing from the core index:



Also, you can look at wages*: the same pattern is visible:



In both cases, you don’t want to make too much of short-term wiggles; the big point is the downward sweep since the slump began. Disinflation is underway, with deflation a real eventual possibility.

*The St. Louis Fed index is the old BLS number; the new one, available here, shows a smoother downward trend.

http://krugman.blogs.nytimes.com/2010/12/05/disinflation-confirmed/

[StephanieVanbryce]

Base Money and Inflation

December 20, 2010, 10:07 am

For those who think that it matters whether you use core or headline inflation:



http://krugman.blogs.nytimes.com/2010/12/20/base-money-and-inflation/