Keeping costs down has assisted the US economy in balancing the control of inflation better than other countries emerging from the global recession, such as China and Europe.
But with the US economy still recovering and inflation rates in other nations rising the concern of slipping back into another recession has become a very real issue.
The red line is a 12 month moving average, meaning it is the average of the annual inflation rate as measured during the last 12 months. If the red line is pointing up we are in an inflationary trend. When the red line is pointing down we have "disinflation" i.e. prices aren't increasing as fast as they were before and when the black line falls below zero that is deflation (prices are actually falling).
However, with the liberalization of economic policy dramatic changes occurred and high inflation was, and still is, expected to remain one of Romania¡¦s key short-term economic concerns....
The black wavy line represents the actual annual inflation rate as calculated from the published by the U.S. Bureau of Labor Statistics. Each month the oldest month drops out of the calculation and a new month is added.
Since then, an explicit policy goal of low inflation has become a mantra for policymakers, and many countries, such as the U.K., New Zealand, Australia, Japan, Sweden, and the eleven countries under the European Central Bank (ECB), have enacted fundamental reforms to achieve that goal.
Once annual gets above 5% it becomes extremely troublesome for the economy. But with inflation so low in spite of the FED's efforts to print money some are saying that Deflationary forces are stronger than the FED.
This paper provides an overview on inflation targeting as a monetary policy strategy, necessary preconditions for its successful implementation, its advantages and disadvantages and issues and challenges that emerging market and transition economies face while defining and implementing this monetary...
Historically speaking, on an annual basis inflation is very low. Deflation rarely occurs on an annual basis although it is more frequent on a monthly basis. Prior to the minor deflationary blip in 2015, the last time we had deflation on an annual basis was in 2009 but prior to that it was 1954 and 1955. Before 1954 deflation was much more common, with frequent deflation during the 1920's and 1930's. So the current situation seems to have more in common with the time period before 1954 than with the period between 1960 and 2000.
However, in 1970s, this was broken by the emergence of Stagflation, which shows a situation where high inflation and high unemployment, compared with historical data, appear simultaneously.
As the January 2014 numbers fell out of the calculation and were replaced by a massive in January 2015 the annual inflation became deflation. Monthly inflation from February 2015 through June although high was not enough to counteract the monthly disinflation in the second half of 2014 so the annual total inflation was still deflationary.
From table 1, Real Growth, Inflation, and Nominal Growth in the United States, 1960-1997, it could be viewed that the Great Stagflation had significant impact on the US economy in 1970s.
The overall trend since 1990 has been down with a few brief periods of higher inflation. The chart shows the annual inflation rate from 1989. The rate peaked in October 1990 at 6.29% from there it trended down until it bottomed just above 1% in 2002. Inflation increased from there to peak at 5.6%in 2008 just before the crash which took it down to a deflationary .
If disinflation continues and the inflation rate crosses below 0%, we turn from inflation to deflation since by definition "deflation" is a negative inflation rate. This is a relatively rare event, the last time that happened (before 2009) on an Annual Basis (prices were lower than year ago) was in 1955, although we have had deflation for a single month on a more regular basis (where prices fell compared to the previous month).