Inflation is Still Low

This morning we got the CPI numbers for July, and they show that inflation is still quite low. Both the headline and core rate rose by 0.1% last month. In the last year, both headline and core are up 1.7%.

Here’s a look at the monthly seasonally-adjusted core rates going back a few years:

The decline during March was a clear outlier but the four following months haven’t seen much of an uptick.

Here’s the real Fed funds rate based off core inflation:

I think this chart says a lot. You can see that even when the Fed does nothing, it’s tightening because inflation is getting softer. In the last 11 months, real rates have gone from -2% to -0.6%.

Posted by on August 11th, 2017 at 12:01 pm

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