Signs of Inflation

Even as measures of economic growth have slowed, inflationary pressures have been rising in the United States. According to the Bureau of Labor Statistics’ latest report, released last Wednesday, the consumer price index (CPI) has jumped 3.9 percent over the twelve months ending September 2011. Most of that increase can be attributed to higher food and energy prices, which have increased by 4.7 percent and 19.3 percent, respectively. Electricity prices have been fairly stable but gas and fuel oil have increased in price by roughly a third.

While price increases have been dominated by food and energy, which are excluded from core CPI calculations, inflationary pressures are observable in the latter measure, as well. Core CPI inflation has been rising at a steady pace since the end of 2010 and is up 2.0 percent as of September. The core personal consumption expenditure (PCE) index, the Fed’s preferred measure of inflation, has tracked the increase in the CPI, rising from less than 1.0 percent in late 2010 to just under 1.7 percent as of August. The Fed’s mandate-consistent upper bound on inflation is generally understood as 2.0 percent.