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US CPI Drops in March on Falling Gasoline Prices


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The US consumer price index decreased in March at an annual rate of 2.14 percent, reversing an upward spike in February. The recent volatility has been almost entirely due to gasoline prices

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US CPI Drops in March on Falling Gasoline Prices

  1. Data for your Classroom from Ed Dolan’s Econ BlogUS CPI Lower in March on Falling Gasoline Prices April 16, 2013 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
  2. Consumer Price Inflation Falls Sharply in March The all-items U.S. consumer price index fell at an annual rate of 2.14 percent in March, reversing an unually sharp upward spike in February Almost all of the February increase and March reversal came from energy prices, especially the price of gasoline. Energy prices have a weight of 9.5% in the CPI Posted April 16, 2013 on Ed Dolan’s Econ Blog
  3. Core Inflation Falls Slightly Food and energy prices are volatile and usually account for much of the month-to-month change in the CPI Their effect can be removed by taking food and energy out of the CPI. The result is called the core inflation rate. The annualized core inflation rate for March was 1.33% Posted April 16, 2013 on Ed Dolan’s Econ Blog
  4. Trimmed Mean Inflation Rises Slightly Another way to remove volatility is the 16% trimmed mean CPI published by the Federal Reserve Bank of Cleveland. It removes the 8% of prices that increase most and the 8% that increase least in each month (or decrease most), whatever they are The 16 percent trimmed mean CPI increased at an annual rate of just 0.72 percent in March Posted April 16, 2013 on Ed Dolan’s Econ Blog
  5. Which Measure is Best? The CPI for all items gives the most accurate measure of current changes in the cost of living Economists at the Fed look closely at the core and trimmed mean CPIs, and at other inflation indicators derived from the GDP accounts, to judge the effect of monetary policy on underlying inflationary trends Posted April 16, 2013 on Ed Dolan’s Econ Blog
  6. Inflation Expectations Remain “Well Anchored” In early December, the Fed announced that it would keep interest rates low until the unemployment rate fell to 6.5 percent (it is now 7.7 percent) and as long as inflation expectations remained “well anchored,” that is, below 2 ½ percent for a two-year time horizon and below 2 percent for longer horizons. This chart, based on data from the Cleveland Fed, suggests that inflation expectations remain “well anchored” near their all-time lows Posted April 16, 2013 on Ed Dolan’s Econ Blog
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