Has Inflation Been Tamed?

Chart of the Week for June 16-22, 2000

The latest news is that inflation, as measured by the CPI (Consumer Price Index), is relatively tame. Over the past 12 months, the CPI is up 3.1%.

However, other key prices do not look so good. For example, the CRB (Commodity Research Bureau) index, which measures the prices of a commodity “basket,” is up 19%! The following price gains are in items that can be important indicators of inflation:

Interest cost, the prime rate, is up 22.6% (from 7.75% to 9.50%)

Oil is up 72.4%

These items are important because increases in them find their way into many other prices. For example, interest rates affect home mortgage payments and company borrowing costs. Oil prices can affect a myriad of products, from gasoline to shipping to manufacturing.

Therefore, the current inflation news measured by the CPI does not appear to be telling the whole story.

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