Median CPI Annual Inflation Falls for 20th Straight Month to a Record Low of 0.5% = No Inflation
According to the Cleveland Fed's report yesterday, the median CPI increased by only 0.50% in May over the same month last year, the same as April's annual increase of 0.50%. This was the 20th consecutive month that the median CPI annual inflation rate dropped or stayed the same, and the 0.50% inflation rates in April and May are the lowest year-to-year inflation rates in the history of the Cleveland Fed's series back to 1984 (see chart above). In contrast, the regular CPI has increased by 2.0% over the last year (May 2009 to May 2010).
Historically, the median CPI has been 50% more accurate at gauging future inflation than the traditional CPI (based on the Cleveland Fed's research), and the median CPI is certainly not now showing any signs of inflationary pressures. In fact, a stronger case could be made for deflation right now than inflation, according to: a) the median CPI being at a 26-year low, and b) the decelerating growth of the money supply (annual growth of 2% or below each week since early March) , see chart below (data here).
As "inflation skeptic" Bob McTeer (former Dallas Fed president) wrote in May on his blog:
"To repeat the obvious, because others won’t, money growth is almost flat. Flat money growth does not cause inflation—especially when we have enormous slack in the economy along with rapid productivity growth and declining unit labor cost. We may get inflation in the next few years, but, if so, it will be based on money growth yet to happen. It hasn’t happened yet."
For the "opposing view," see Scott Grannis's recent post "Inflation Pressures are Building in the Production Pipeline."