CPI Shows Continued Disinflation

The BLS released its monthly report on consumer prices this morning. The core rate (excluding food and energy prices) rose .1% in September, bringing the annual rate of core consumer price inflation down to 1.25% over the past year. So the trend of declining inflation, called “disinflation,” continues, as I suggested in last week’s post about the PPI. For your amusement and edification, I’ll include a graph.

Given that it is generally accepted among economists who do this sort of thing that the CPI overstates actual inflation by a bit (maybe by .5% per year, maybe by as much as 1% per year), the US is basically in a period of flat prices right now. Any further disinflation, however, will bring up the dreaded ‘d’ word: deflation. And as I suggested last week, deflation could cause some serious problems. Stay tuned.