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Friday, May 27, 2005

Disinflation Anyone?

"Stripping out volatile food and energy costs, prices rose just 0.1 percent, the smallest increase since December and a slowdown from a 0.3 percent March advance. Over the 12 months through April, prices were up 1.6 percent, a touch less than in the 12 months ended in March."

So core US consumer price infltion is running at an annual rate of 1.2%. Inflation scare, what inflation scare?


The Prudent Investor said...

ex food and energy always leads me to the question, "can you eat indices in a dark and cold place and survive?" wouldn't the term be more correct the other way round? Core inflation measured from exactly these two groups as these are two most unflexible items (save for rent) in consumers' spending, especially in America where public transport is no alternative to a car because there is no adequate public transport in many places.

Edward Hugh said...

"can you eat indices in a dark and cold place and survive?"

I suppose the point about the CPI isn't that it measures the cost of living, but that it can give some indication of underlying changes in the cost of living.

I think it's obvious we are living with higher oil prices, the interesting thing is how much they make themselves felt across the board. The argument about whether it is legitimate or not to strip some things out can go on forever.

I still think the underlying US inflation is dangerously low, and that a sudden rapid rise in the dollar, or oil at $35 and a housing stall could send you 'underground', which would then present all kinds of interesting problems for US monetary policy.

Risk here is not symmetric.

Regards anyway.