Inflation on the Way?

The Bureau of Labor Statistics released its Consumer Price Index (CPI) figures today, and it shows that inflation has picked up in the past few months.

Looking at the past year, the CPI has increased 2.7% from March 2010 to March 2011.  But most of that increase has been recent.  In the seven months from March 2010 through October 2010 the CPI rose 0.5%.  The five months from October 2010 to March 2011 saw the CPI rise by 2.2%.  That’s a 5.3% annual rate of inflation over the past five months.

Looking at month-to-month changes might be of limited value, because the price level has short-term fluctuations around long-run trends, but if we just look at last month, the CPI was up almost a full percent (actually, 0.975%), which is an annual rate of 11.7%.  The trend is up.  In February the CPI was up 5.9% at an annual rate, and in January 4.8% at an annual rate.  The figure for December was 2%.

There has been some debate over the past year within the Federal Reserve’s Board of Governors about whether monetary policy has been too loose, and too inflationary.  Recent increases in the CPI suggests it has.