Inflation Uptick Not a Worry…For Now

By at 10 April, 2019, 10:58 am

by Raymond J. Keating-

According to the latest estimate from the U.S. Bureau of Labor Statistics, the Consumer Price Index jumped up by 0.4 percent in March. That’s a marked step up in CPI inflation from the previous four months in which inflation largely was absent.

Source: Federal Reserve Bank of St. Louis, FRED

The increase in March, according to the BLS, was due to the following: “The energy index increased 3.5 percent in March, accounting for about 60 percent of the seasonally adjusted all items monthly increase. The gasoline index increased sharply, and the electricity index also rose, although the natural gas index declined.”

So, is the March increase something to be worried about? It isn’t … for now.

The March inflation number looks to be a one-month blip up in an otherwise tame inflation environment. Over the past year, inflation ran at only 1.9 percent, and that fits in with the longer-run inflation picture. As noted in the SBE Council piece on last month’s inflation report, “In fact, inflation basically has been nonexistent for the most recent seven months. Looking back over longer periods, tame inflation has been the reality for the previous seven years (from 2012 to 2018), and the U.S. has an incredible low-inflation streak – with an exception of a year here and there – for a quarter century.”

However, the current low-inflation environment should not be taken for granted. Someone once said that “eternal vigilance is the price of liberty.” When it comes to the economy, one might say that eternal vigilance on monetary policy is the price of low inflation. That is, the Fed needs to remain vigilant, even in a low-inflation environment, in maintaining sound monetary policy focused on price stability.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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