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Current Inflation Rate

Each month's inflation rate from 2007-2014

By

Current Rate - June 2014

Photo: Getty Images

Prices rose .3% during June, thanks to a 3.3% spike in gas price. New car prices fell .3%, and used vehicles were down .4%. Medical care service costs rose exactly zero percent, a sign that the ACA may be pushing costs down.

The critical core inflation rate, which is measured year over year, was 1.9%. This was slightly below the Federal Reserve's 2% target.

How It Affects You

groceries-dad.jpg
Photo: Katrina Wittkamp/Getty Images

The inflation rate is an important economic indicator. It tells you how fast prices are changing in the economy. It's measured by the Consumer Price Index, or CPI, which is reported by the Bureau of Labor Statistics (BLS) each month.

Moderate inflation is actually good for economic growth. When consumers expect prices to rise, they are more likely to buy now, rather than wait. This increases demand That's because inflation is usually driven by expectations of inflation, as pointed out by Past Fed Chair Ben Bernanke. This means that, if people and investors think prices will go up, they will buy things now, increasing demand and actually driving the prices further up. In other words, inflation is a self-fulfilling prophecy. 

The FOMC also looks at the core inflation rate when it decides at its monthly meetings whether to raise the Fed funds rate. The core rate removes the volatile effects of gas, food and oil prices. The Federal Reserve sets a target rate of 2%  for the core rate. When the rate is lower than the target, the Fed may use expansionary monetary policy, and lower interest rates. When the rate is higher than the 2% target, it may use contractionary monetary policy, and raise rates. 

Watching the inflation rate from month to month will help you determine where the economy is in the business cycle.

May 2014

buying-house.jpg
The cost for shelter rose 2.9% in the last year. Photo: RK Studio/Getty Images

The critical core inflation rate rose 2.0% year over year. It was driven by a 2.9% increase in housing costs, the biggest jump since March 2008. The headline CPI rose 2.1%.

During the month, prices rose .4%, driven by a whopping 2.3% increase in electricity. However, that was due to California's semi-annual climate change credits. 

April 2014

small dollar
Your dollar buys .3% less than it did last month. Photo by Ed Honowitz/Getty Images

Inflation was .3% during the month, driven mainly by a 2.3% spike in gasoline prices. Year-over-year, prices rose a solid 2%. Every category, except apparel and automobiles, saw at least a 1% increase. However, the core inflation index was only up 1.8%, still below the Fed's target.

March 2014

Weak $20 bill
High inflation is actually a sign of strong demand. Photo: Nick Koudis/Getty Images

 In March, falling fuel oil prices were offset by moderate price increases across the board. Despite this strength, it didn't exactly show the strong demand needed to boost hiring.

February 2014

retail
Apparel prices dropped, offsetting higher home heating oil costs. Photo: Blend Images - John Lund/Marc Romanelli

February was a repeat of January. A 4.7% increase in home heating oil prices was offset by declines elsewhere. Monthly inflation was just .1%, while the year over year core inflation rate was just 1.6%, well below the Fed's target. 

January 2014

Home oil
Heating oil prices have soared as energy markets cope with a colder then expected winter. Photo by William Thomas Cain/Getty Images

Brutal winter storms pummeled the nation, driving home heating oil prices up 3.7%. Natural gas prices rose nearly as much (3.6%). Fortunately, these price jumps were offset by drops  in gasoline, new cars and trucks and apparel. As a result, inflation rose a scant .1% overall. 

These fuel oil and natural gas prices will drop in the spring, as will any price jumps in gasoline. That happens every year, as refineries finish their maintenance and reopen for the summer driving season. Therefore, expect inflation to remain even less of a threat.

The core inflation rate was just 1.6%.

December 2013

hyperinflation
Hans and Greta playing with worthless marks during the Weimar Republic. Credit: Albert Harlingue/Getty Images

Inflation rose .3%, the most in six months, creating fears of hyperinflation. Goldbugs caused a rally in the precious metal as a hedge. Many are concerned that the Fed's Quantitative Easing will drive quickly rising prices like that seen during the Weimar Republic in German. However, the core inflation rate was only up 1.7%, below the Fed's target.

November 2013

Stock Market
Beware a stock market bubble. Credit: Getty Images

Prices rose exactly zero in November, keeping inflation at just 1.2% for the year,  thanks to a drop in gas prices.  The core inflation rate was just 1.7%.

Many analysts believe QE has created an asset bubble in both stocks, which have been hitting new highs, and in bonds, driving the yield on the benchmark 10-year Treasury down to 2.5%. That's the blind spot in the Consumer Price Index, which only measures the prices of consumer goods and services. As the retail reports have shown, consumers aren't really creating the demand needed to drive up prices. That's because there's hasn't been much of an increase in wages. 

October 2013

Halloween
Pumpkins at Halloween. Credit: Bill Green/Getty Images

Instead of inflation, there was mild deflation thanks to a 2.9% drop in gas prices. Although deflation is a threat, this won't be permanent. Gas prices normally decline in the fall, and rise in the spring. Second, the core inflation rate (without these volatile gas and food prices) was 1.7%, below the Fed's 2% target.  

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