Entering text into the input field will update the search result below

Is Inflation Back In The Game?

Jul. 02, 2018 8:21 AM ET
John M. Mason profile picture
John M. Mason


  • The core inflation rate finally got back up to 2.0 percent year over year, and the Federal Reserve appears to believe that it will stay there or even rise a little more.
  • The behavior of inflation throughout the entire current period of economic recovery has not been fully understood and so questions are being raised about how it will behave going forward.
  • Fed Chairman Powell has stated that this news must be seriously reviewed so that inflation does not get out of hand.
  • The Fed must be closely watched because a pickup in inflation could change the whole ball game.

During almost all of the current economic recovery from the Great Recession, one of the major questions has been… where is inflation?

At times, there was even concern, especially in Europe, about the possibility that deflation might become a problem.

Even through three rounds of quantitative easing in the United States and an unemployment rate that dropped below what many considered to be the full employment level, the rate of inflation seemed to be on the tepid side.

Last Friday, that changed for a lot of people.

On that day, the Commerce Department released the data on the two consumer price indices that the Federal Reserve watches most closely. The Fed’s target goal for inflation is 2.0 percent.

The broad measure of consumer prices showed a 2.3 percent year-over-year rate of growth for May. Although this particular measure has jumped around in the 2.0 percent range several times, there have not been firm signs that it will stay around or above this level.

The more crucial measure of inflation is the core consumer price index, the measure that excludes food and energy prices because of their volatility, and the May figure came in 2.0 percent over the level of the index in May 2017.

This is the first time in recent years when this core measure came in at the 2.0 percent level.

Justin Lahart writes in the Wall Street Journal: “So, after years of frustration over doggedly low inflation, mission accomplished for the Fed.”

Well, Mr. Lahart may be overstating things. After all, this is just a one month accomplishment.

After all, since May 2011, this core measure of consumer price inflation has averaged only 1.3 percent, and even in this measure, which is supposed to be more stable than the total consumer price index, there has been quite a bit of variation over

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.