Inflation, at the very core, is the rate at which the price level in an economy increases. It can also be called the rate at which the purchasing power of individuals is falling: as prices increase, less and less can be bought with each dollar. There are many factors that can cause inflation to increase, but two of the major ones are excessive money supply and reckless government spending.
Inflation is not a problem if it is low; but, once it escalates, it causes severe economic problems. To control inflation, central banks use different tools such as interest rates. In the U.S., the Federal Reserve targets inflation rate in the U.S. economy to be between two percent and three percent.
The inflation figures in the U.S. are reported by the Bureau of Labor Statistics (BLS) each month, for the previous month.
Since the financial crisis of 2008 and 2009, inflation in the U.S. economy has been very low. In 2013, prices increased by 1.5%, which was well below the Federal Reserve’s target. But, over the past few years, the central bank has printed a significant amount of money to boost the economy. The money supply, as a result, has substantially increased. In addition to this, the U.S. government has also spent, continuing to incur budget deficits year-over-year. Going forward, this could mean soaring inflation.
On Friday, May 22, 2015, the Bureau of Labor Statistics released its report on the consumer price index (CPI) for April. The CPI increased 0.1% month-over-month in April. (Source: Bureau of Labor Statistics, May 22, 2015.)Meanwhile, the core CPI, which excludes food and energy (two of the biggest expenses), gained 0.3% in April—the. Read More
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On May 11, 2015, the Federal Reserve Bank of New York released its survey of consumer expectations. The results from about 1,200 respondents suggest that the expected inflation in the next few years will be soft. (Source: Federal Reserve Bank of New York, May 11, 2015.)According to the survey, the coming one-year expected inflation. Read More
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