Wednesday, November 17, 2010

Not-so-balanced risks when it comes to inflation

One more posts on the inflation outlook in the US related to our earlier post. With the release of the last CPI data from BLS, we continue to see a downward trend in inflation. In particular, we have seen the smallest annual change in core inflation since 1957. This is a good opportunity to reproduce the chart below (via Mark Thoma, original source San Francisco Fed).

It compares the evolution of core inflation in the US until September 2010 with the evolution of core inflation in Japan in the months that preceded deflation.

Quite similar so far. The US is today where Japan was in mid 1995. Let's hope that the months ahead show a divergent path between the two lines.

Antonio Fatás
on November 17, 2010 |   Edit