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US CPI Falls in April at Fastest Rate since 2008

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The US CPI fell at an annual rate of more than 4 percent in April, the fastest rate of decrease since late 2008, when the economy was in free fall

The US CPI fell at an annual rate of more than 4 percent in April, the fastest rate of decrease since late 2008, when the economy was in free fall


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  • 1. Data for your Classroom fromEd Dolan’s Econ BlogUS CPI Falls in April at FastestRate since 2008May 16, 2013Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are freeto use these slides as a resource for your economics classes together with whatever textbook you are using. If you likethe slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
  • 2. Posted May 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.comConsumer Price Inflation Falls Again in April The all-items U.S. consumer priceindex fell at an annual rate of 4.35percent in April, following a 2.14percent rate of decrease in March That was the fastest rate ofdecrease since late 2008, when theeconomy was in free fall Almost all of the variability in the CPIsince the start of the year has comefrom energy prices, especially theprice of gasoline. Energy priceshave a weight of 9.5% in the CPI
  • 3. Posted May 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.comCore Inflation Falls Below 1 Percent Food and energy prices are volatileand usually account for much of themonth-to-month change in the CPI Their effect can be removed by takingfood and energy out of the CPI. Theresult is called the core inflation rate. The annualized core inflation rate forMarch was just 0.6 percent
  • 4. Posted May 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.comTrimmed Mean Inflation Rises Slightly Another way to remove volatility isthe 16% trimmed mean CPIpublished by the Federal ReserveBank of Cleveland. It removes the8% of prices that increase most andthe 8% that increase least in eachmonth (or decrease most), whateverthey are The 16 percent trimmed mean CPIrose slightly faster in April than inMarch, but the its annual rate ofincrease remained below 1 percent
  • 5. Posted May 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.comWhich Measure is Best? The CPI for all items gives the mostaccurate measure of currentchanges in the cost of living Economists at the Fed look closelyat the core and trimmed mean CPIs,and at other inflation indicatorsderived from the GDP accounts, tojudge the effect of monetary policyon underlying inflationary trends
  • 6. Posted May 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.comInflation Expectations Fall Slightly and Remain “Well Anchored” In early December, the Fedannounced that it would keep interestrates low until the unemployment ratefell to 6.5 percent (it is now 7.5percent) and as long as inflationexpectations remained “wellanchored,” that is, below 2 ½ percentfor a two-year time horizon and below2 percent for longer horizons. Both 5- and 10-year inflationexpectations fell slightly in April andremain “well anchored,” near their all-time lows
  • 7. Click here to learn more about Ed Dolan’s Econ textsor visit www.bvtpublishing.comFor more slideshows, follow Ed Dolan’s Econ BlogFollow @DolanEcon on Twitter