Advertisement

Chart of the week: US inflation is worse than it looks

The current annual rate of consumer price inflation (CPI) in America is just below the US Federal Reserve’s target of 2%, but to most people it feels much higher.

979-COTW-634

The current annual rate of consumer price inflation (CPI) in America is just below the US Federal Reserve's target of 2%, but to most people it feels much higher, says John Mauldin in Thoughts from the Frontline. Even at 2% a year prices jump by an overall 50% in 20 years, and in any case CPI "doesn't reflect real-life spending".

Advertisement - Article continues below

For some of life's necessities, prices have risen "dramatically". Over the past two decades medical care, housing and education (the cost of going to university) have jumped by far more than CPI. The Fed also uses an accountancy technique called Hedonic Quality Adjustment, the upshot of which is that if an item has improved in quality, it is deemed not to have become more expensive. "Does that match your experience?"

Advertisement
Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/516944/why-wall-street-has-got-it-wrong-again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Visit/economy/us-economy/601367/trump-urges-the-us-federal-reserve-to-bring-in-negative-interest-rates
US Economy

Trump urges the US Federal Reserve to bring in negative interest rates

Donald Trump has urged the Federal Reserve to embrace negative interest rates.
21 May 2020
Visit/economy/601306/for-how-long-can-stockmarkets-ignore-rising-unemployment
Economy

For how long can stockmarkets ignore rising unemployment?

US unemployment figures are looking terrible – up to 20 million people have lost their jobs. But markets don’t seem to care. John Stepek explains what…
11 May 2020

Most Popular

Visit/investments/commodities/gold/601444/these-seven-charts-show-exactly-why-you-must-own-gold-today
Gold

These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020
Visit/investments/stockmarkets/601460/disease-rioting-and-mass-unemployment-so-why-are-markets-soaring
Stockmarkets

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
Visit/economy/eu-economy/601463/why-a-stronger-euro-is-good-news-for-investors
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020