Friday, January 18, 2013

CPI Unchanged in December; Five-Year Inflation Rate Hits 45-Year Low

Economists are sometimes accused, and justly so, of trying to read too much into the latest monthly wiggle in every data series that they watch. To counter that tendency, we can start the discussion of today’s release of inflation data with a longer-term view. Instead of looking at monthly CPI data, let’s look at five-year averages. As the following chart shows, 5-year inflation has fallen to an annual rate of just 1.9 percent, its lowest since the Vietnam War started heating things up in the 1960s.

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