Current Annual inflation for the 12 months ending in March 2021 is 2.62% up sharply from 1.68% in February.
The inflation rate plays an important role in determining the health of an economy. Countries with extremely high inflation rates are said to have hyperinflation and when this occurs the economy is often near collapse. But even moderate inflation can rapidly erode purchasing power and creates uncertainty as businesses have more difficulty estimating future costs. Usually, high inflation rates also correspond to high interest rates as lenders need to compensate for the decline in purchasing power of future interest and principal repayments. This results in higher costs of doing business and place an overall drag on the economy.
U.S. Annual Inflation Rate in Percent
We calculate the Current Inflation rate (see table below) to two decimal places while the Bureau of Labor Statistics only calculates inflation to one decimal place. Therefore, while being based on the same government Consumer Price index (CPI-U) our data provides a "finer" view.
July thru October 2019 is a perfect example, according to the government statistics July=1.8%, August=1.7%, and September=1.7%. However, our data shows inflation in July as 1.81%, August as 1.75%, September as 1.71%. Therefore instead of the inflation rate being "flat" it is actually falling slightly over this 3 month period. Of course this could just be a statistical anomaly but..
Using this enhanced view we might be alerted to watch for the possibility of a bigger decline... which in this case didn't happen as inflation rates for the following months began rising to 1.76%, then 2.05% and 2.29%, and finally 2.49% in January 2020.
In another example we see August 2003 and September with the Government saying inflation rates were 2.2% and 2.3% respectively. This would lead us to believe that inflation rose 0.1% during that period. In actuality however, it rose from 2.16% to 2.32% or a 0.16% increase, substantially more than 0.1%! Once again this finer view gives us a better picture that inflation might be rising more than it appeared to be.
For a more in depth commentary see Annual Inflation Rate Commentary
Current Annual Inflation Chart
According to the BLS commissioner's report, "The
Consumer Price Index for All Urban Consumers (CPI-U)
increased 0.8 percent in April on a seasonally adjusted
basis after rising 0.6 percent in March, the U.S. Bureau
of Labor Statistics reported today. Over the last 12
months, the all items index increased 4.2 percent before
seasonal adjustment. This is the largest 12-month
increase since a 4.9-percent increase for the period
ending September 2008.
The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.
The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.
When we measure it to two decimals (on a non-adjusted basis) monthly inflation was 0.82% in April and annual inflation was 4.16% rather than 4.2%. Key components are the increase in Energy prices which increased 25.1% over the last year but declined slightly over the last month. However, much of the energy increase was because there was a major drop a year ago due to the oil price crash and COVID. For more information see the price changes in various components of the Consumer Price Index over the last 20 years.
Seasonally Adjusted Inflation Components Table
Current Inflation Table
The Inflation table above is updated monthly and provides the current Annual US Inflation Rate (not seasonally adjusted) in the right-hand column and the other columns show various monthly components on a Seasonally Adjusted basis. The Inflation rate is calculated using the Current Consumer Price Index (CPI-U) published monthly by the Bureau of Labor Statistics. CPI Index Release DatesFederal Reserve has a constant balancing act to try to reconcile the government's desires for higher inflation with the need for a healthy economy.
In an effort to convince people that inflation is really good, the government has a constant media circus going promoting the benefits of inflation and decrying the evils of deflation--- but what's so bad about falling prices?
Their major argument revolves around the "stimulating" effects of inflation. Basically it makes people feel richer until they eventually realize that each of their dollars now buys less. But in the meantime they tend to spend the "excess". This results in people buying things they wouldn't have, had they realized that their money was actually worth less than they thought. Eventually this results in a monetary "hangover" as the effects of their buying binge become apparent.
Inflation is largely a result of increases in the money supply months or even years previously. Because of this serious lag in the time between the money creation and the time it shows up in the economy the FED must estimate the impact their money creation efforts will have years in advance. The Federal Reserve tries to target a 2% inflation rate but often over or underestimates the effect their actions will have.
The Federal Reserve monitors the inflation rate for its targeting purposes using the "Core Inflation Rate" which excludes food and energy leading some people to mistakenly believe that the U.S. government doesn't track those items in the inflation rate. Actually the Bureau of labor statistics does track them but the FED simply excludes them for targeting purposes because they are volatile and subject to external forces unrelated to the money supply.
We believe a picture is worth a thousand words, so we track the recent inflation rate in chart form to give you a better sense of the current direction of inflation and also the longer term inflation trends.
The inflation rate is calculated using the Consumer Price Index or CPI.
To calculate inflation from a month and year to a later month and year, Try our Inflation calculator.
We also post the previous Inflation Rates in our Historical Inflation Tables. The Historical Consumer Price Index is also available in table format. You can instantly see the current inflation trend in our chart of the Annual Inflation Rate.
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