Tuesday, March 1, 2011

The fear over inflation is stupid

Right now we hear lots of worries in the financial press about high inflation. We've heard these worries throughout the financial crisis, which is stupid because inflation barely even exists. This graph shows that inflation is below the Fed's target rate of 2.0-2.5%.

The red line shows core PCE inflation, the measure of inflation tracked by the Fed due to its relatively low volatility. The blue line shows the GDP Deflator, the best measure of inflation affected by monetary policy. Is inflation currently something to worry about? Not by a long shot!

No comments:

Post a Comment