’flation

The late Ed Hart of the late Financial News Network used to refer to the set of topics around broad price changes as “’flation,” which neatly covers inflation, deflation, and disinflation in a single word.

Some analysts in the U.S. are getting worried about the “in-“ kind of ’flation. With core inflation hitting 2.2% for the year ending in January—though the headline figure, dragged down by the collapse in oil prices, was just 1.3%—hawks are fretting that the Fed has fallen behind the curve.

Maybe, but maybe this is better news than it seems. Graphed below are headline and core inflation for the U.S., the eurozone, and Japan. The latter two are in or near deflation, a sign of profound and extended economic weakness. The U.S., for all its troubles, is not suffering from those maladies. That 2.2% core reading is just slightly above the average since 2000; the 1.4% headline is 0.8 point below that average.
It might be a good idea to relax and give thanks that the U.S. is not caught in what our beloved if irascible John Liscio used to call “the tractor beam of deflation.” There’s plenty of time to get on top of this one if the rise persists.

 

Consumer price index all and core