Inflation Rose 1.4 Percent Over the Past Year

A blog about business and economics.
June 18 2013 8:58 AM

BLS Reports 1.4 Percent Inflation Over the Past Year, Why Are We Talking About Tapering?

An Exxon gas station advertises its gas prices on Feb. 1, 2008, in Burbank, Calif.
An Exxon gas station advertises its gas prices on Feb. 1, 2008, in Burbank, Calif.

Photo by David McNew/Getty Images

The entire conversation around this week's Federal Reserve meeting is over whether and how rapidly the Fed will implement or signal the future implementation of tighter money via a "tapering" of its bond purchases. But the question is: Why? Today the Bureau of Labor Statistics reported that over the past 12 months we've seen 1.4 percent CPI inflation. If you restrict your attention to "core" inflation, which is the more reliable indicator for monetary policy purposes, we have 1.7 percent inflation over the past year.

Now just close your eyes and forget everything that's happened since the zero bound. What happens when inflation comes in below target? What happens is we say "this is good news for the American economy, because it means the Fed is going to cut interest rates and boost output and employment secure in the knowledge that there are no inflation pressures to worry about." The zero bound, of course, makes all kinds of differences to the Fed's practical operations and capabilities. But it in no way undermines that basic logic. If we had 2.3 percent core inflation and 2.6 percent headline inflation, then there'd be a real reason to tighten monetary policy. Given the high unemployment rate, there'd also be a reason to resist that pressure to tighten. But we're not 0.3 percentage points above the inflation target, we're 0.3 percentage points below the inflation target. Even if the unemployment rate were dramatically lower, tighter money would still be perverse.

With joblessness high and inflation low, the right policy is clear—easier money, not tighter.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Don’t Worry, Obama Isn’t Sending U.S. Troops to Fight ISIS

But the next president might. 

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Altered State

The Plight of the Pre-Legalization Marijuana Offender

What should happen to weed users and dealers busted before the stuff was legal?

Surprise! The Women Hired to Fix the NFL Think the NFL Is Just Great.

You Shouldn’t Spank Anyone but Your Consensual Sex Partner

Moneybox
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Altered State
Sept. 17 2014 11:51 PM The Plight of the Pre-Legalization Marijuana Offender What should happen to weed users and dealers busted before the stuff was legal?
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Dear Prudence
Sept. 18 2014 6:00 AM All Shook Up My 11-year-old has been exploring herself with my “back massager.” Should I stop her?
  Double X
The XX Factor
Sept. 17 2014 6:14 PM Today in Gender Gaps: Biking
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Brow Beat
Sept. 17 2014 8:25 PM A New Song and Music Video From Angel Olsen, Indie’s Next Big Thing
  Technology
Future Tense
Sept. 17 2014 9:00 PM Amazon Is Now a Gadget Company
  Health & Science
Medical Examiner
Sept. 17 2014 11:48 PM Spanking Is Great for Sex Which is why it’s grotesque for parenting.
  Sports
Sports Nut
Sept. 17 2014 3:51 PM NFL Jerk Watch: Roger Goodell How much should you loathe the pro football commissioner?