Current U.S. Inflation Rate Statistics and News
Explanation and the Monthly Inflation Rate Statistics Since January 2007
Gasoline prices rose 2.5% even though there was no increase in oil prices. They contribute 70% of gas prices. The Energy Information Administration's oil price forecast remained at $64 a barrel for 2019 and $65/b in 2020.
The prices of used cars and trucks rose 0.9%, while new vehicle prices fell 0.2%. Transportation services rose 0.3%.
In the last 12 months, the cost of health care services rose by 3.3%. Drug prices fell 0.4% during that time. Health care costs have risen more slowly since Obamacare took effect in 2014. Before that, prices rose 7% to 8% a year.
Current Core Inflation Rate
The core inflation rate was 2.2% year over year. The core rate eliminates the impact of volatile oil and food prices. Their prices change daily because they're based upon commodities trading. Oil prices also tend to rise in the spring in anticipation of higher demand from summer vacationers. High oil prices will increase the prices of fertilizer and transportation costs. That will create high food prices.
The core rate was slightly above the Federal Reserve's 2% inflation target. The Federal Open Market Committee has lowered the fed funds rate to 2.25% at its July meeting. The Fed last raised the rate to 2.5% at its December 19, 2018, FOMC meeting. The Fed is trying to offset the negative impact of President Trump's trade war.
In January 2012, the Fed switched to the Personal Consumption Expenditures to measure inflation. The Fed considers it to be more reflective of true underlying inflation trends. Its core inflation rate was 1.6% year over year as of June 2019, well below the Fed's target. That's from the most recent release from the Personal Income and Outlays report.
How the Current Inflation Rate Affects You
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. As pointed out by former Fed Chair Ben Bernanke inflation is usually driven by expectations of inflation. 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 Federal Open Market Committee reviews the core inflation rate when it decides at its eight FOMC meetings whether to raise the fed funds rate. The Federal Reserve set a target rate of 2% for the core rate. When the rate is lower than the target, the Fed may use expansionary monetary policy. It will lower the fed funds rate to boost economic growth. That's done to prevent any possible recession.
When the rate is higher than the 2% target, the Fed uses contractionary monetary policy. It raises rates to keep prices from rising faster than your paycheck. Some critics worry that higher interest rates would weaken consumer demand. That would slow economic growth, reducing its ability to create jobs.
Some people worry that inflation will skyrocket, causing hyperinflation. They are concerned that price increases could be like that seen during the Weimar Republic in Germany. When that happens, gold bugs can cause a rally in the precious metal as a hedge. But to have hyperinflation, prices must rise 50% a month.
January: Up 0%. Gasoline prices fell by 5.5%. It offset a 5.1% increase in natural gas prices. These prices drop in the spring. That's when refineries finish their maintenance and reopen for the summer driving season. Expect inflation to remain even less of a threat.
February: Up 0.2%. Prices fell 1% in prescription drugs but gas prices rose 1%.
March: Up 0.4%. Gas prices rose 6.5% while apparel fell 1.9%.
April: Up 0.3%. High gas prices offset declines in used cars and trucks.
May: Up 0.1%. Gas prices fell 0.5% and used cars fell 1.4% almost offsetting small increases in other categories.
June: Up 0.1%. Gas prices fell 3.6% while cars rose 1.6% and apparel prices increased by 1.1%.
July: Up 0.3%. Gas prices rose 2.4% while used cars rose 0.9%. These offset a 0.2% decline in new vehicle prices.
2018: 1.9% with Core Inflation at 2.2%
January: Up 0.5%. The cause was an increase in gas prices. That offset a drop in used vehicles.
February: Up 0.5%. Despite a drop in gasoline prices, prices increased in energy services, especially piped gas. Prices also rose in apparel and transportation.
March: Up 0.2%. Gas prices fell because OPEC and U.S. shale oil producers continued to flood the market with supply. Lower gas prices offset slightly rising prices in shelter, food, and transportation. The cost of medical care services rose 0.5%. That's still less of an increase than before Obamacare.
April: Up 0.4%. High gas prices offset mild price decreases in vehicles, prescription drugs, and transportation.
May: Up 0.4%. Higher gas prices offset a decline in used car and truck prices.
June: Up 0.1%. Higher gas prices offset declines in electricity, piped gas, and apparel.
July: No increase. Higher used cars and truck prices were offset by lower gas and drug prices.
August: Up 0.1%. Higher gas prices were almost offset by a drop in apparel and drug prices.
September: Up 0.1%. Used car and truck sales and gas prices fell.
October: Up 0.3%. Prices of gas and used vehicles rose.
November: Prices were flat. Rising car prices offset falling gas prices.
December: Prices were flat. Prices of used vehicles, drugs, and transportation fell along with gas prices.
2017: 2.1% with Core Inflation at 1.8%.
January: Up 0.6% due to a 7.8% increase in gas prices. That offset a 0.4% drop in used vehicles. Healthy inflation made it more likely the Fed would end its expansive monetary policy in the near future. The confirmation of a strong economy is good for the stock market.
February: Up 0.3%. Upticks in transportation services and clothing barely offset declines in gas and vehicle prices. Health care supplies fell.
March: Up 0.1%. Price drops in almost every category. Gas prices dropped.
April: Up 0.3%. Increase in gas prices offset deflation in almost every other category including health care.
May: Up 0.1%. Gas prices drove it, but prices also fell in cars, apparel, and medical care services.
June: Up 0.1%. Prices fell for almost every category. But they were offset by increases in health care, transportation services, shelter, and apparel.
Many people had worried that higher interest rates would suppress the housing market. The BLS reports on rent prices as a proxy for housing prices. This means it can miss some extreme jumps in price if rentals don't keep up with housing prices. This happened in 2005, which is one reason the Fed missed that asset bubble.
July: Down 0.1%. Medical care commodities rose. That was almost offset by a drop in new and used vehicle prices.
August: Up 0.3%. Gas prices rose.
September: Up 0.5%. Gas prices rose thanks to shortages caused by Hurricane Harvey.
October: Down 0.1%. Cause was a drop in gas prices. That helped boost Halloween sales. Low inflation allowed the FOMC to end Quantitative Easing. It announced it would no longer buy new Treasurys as its holdings expired.
November: No price increase. Gas prices rebounded.
December: Down 0.1%.
2016: 2.1% with Core Inflation at 2.2%
January: Up 0.2%. Prices fell in gasoline, home heating oil, and electricity.
February: Up 0.1%. Gas prices fell.
March: Up 0.4%. Gas prices rose while apparel prices fell as the dollar weakened.
April: Up 0.5%. Gas prices rose while auto prices fell.
May: Up 0.4%. Used car and truck prices fell while gas prices rose.
June: Up 0.3%. Gas prices rose.
July: Down 0.2%. Declines in gas prices were almost offset by mild increases in the cost of health care.
August Up 0.1%. Falling auto and gas prices were more than offset by rising health care costs.
September: Up 0.2%. A huge rise in gas prices. It offset price drops in restaurants, new and used vehicles, and apparel. The cost of medical care services was flat.
October: Up 02.%. Gas prices skyrocketed. Slightly lower prices in restaurants, used vehicles, and transportation services offset the spike.
November: Up 0.1%. Gasoline prices rose while medical care commodities fell.
December: No price increase. Gas prices and transportation services rose.
The BLS inflation calculator quickly shows how inflation eats away at your purchasing power. For example, a 2.5% inflation rate means that something that cost $100 last year now costs $102.50. It also means you need a 2.5% raise just to stay even. Not to make you feel bad, but if you were celebrating your hard-earned 3.5% raise, thanks to inflation it is really only worth 1.0% in additional buying power.