Three-Year Inflation Rate is Lowest in 54 Years
From the Uneasy Money blog, in response to a recent WSJ editorial defending Gov. Perry's hard money position and his criticism of Fed Chair Bernanke's record of easy money:
"Well, let’s take a look at Mr. Bernanke’s record of currency debasement. The Bureau of Labor Statistics announced the latest reading (for July 2011) of the consumer price index (CPI); it stood at 225.922. Thirty-six months ago, in July 2008, the index stood at 219.133. So over that entire three-year period, the CPI rose by a whopping 3.1% (see chart above).
That is not an annual rate, that is the total increase over 3 years, so the average annual inflation rate over the whole period was less than 1%. The last time that the CPI rose by as little as 3% over any 36-month period was 1958-61. It is noteworthy that during the administration of Ronald Reagan — a kind of golden age, in the Journal‘s view, of free-market capitalism, low taxes, and sound money — there was no 36-month period in which the CPI increased by less than 8.97%, or about 3 times as fast as the CPI has risen during the quantitative-easing, money-printing, dollar-debasing orgy just presided over by Chairman Bernanke."
MP: Actually, the CPI in July 2011 was 225.425 (not 225.922), so the three-year inflation rate through July 2011 was only 2.87% (not 3.1%), the lowest rate since January 1957, more than 54 years ago. Although I have not seen this type of three-year inflation analysis before, I think there is some value at looking at inflation rates beyond the normal one-year time frame. This could help explain why: a) long-term interest rates like 30-year fixed rate mortgages are so low, and b) why market-based measures of inflation expectations based on the "breakeven rates" (regular minus TIPS treasury yields) have been so low.
HT: Benjamin Cole