Bureau of Labor Statistics, via Haver Analytics Six-month change in the Consumer Price Index.
The lack of inflation this year is a story that deserves more attention than it has received.
On Friday, the Labor Department will release the inflation number for August. Economists are expecting an increase of about 0.2 to 0.3 percent over July’s Consumer Price Index. If that’s correct, it won’t be nearly enough to reverse a remarkable period in which prices have barely risen at all.
Over the last two years, inflation has been zero. Over the last year, it has been just 1.3 percent. Over the last six months, it has been below zero — negative 0.7 percent.
Since the Labor Department started keeping records in 1947, there have been only six six-month periods when prices have fallen more than that. All of them were in 1950, an unusual time when prices were falling even though the economy was growing.
This year’s price declines are clearly a reflection of the economy’s weakness. And yet the Federal Reserve has continued to
resist taking aggressive action to lift growth.
Remember, the Fed has a dual mission: keep inflation contained and maximize employment. By any measure, inflation is contained, and the economy is millions of job shy of maximum employment. Yet the Fed has taken only minor actions to lift growth and says it stands ready to take more action.
Why? The Fed — especially the regional Fed banks — is filled with economists and bankers who have strong memories of the 1970s and 1980s inflation. They’re always on guard against it.
There is no question that inflation can be terrible. Right now, though, it sure looks like the last war.
economix.blogs.nytimes.com
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