Inflation and Recession

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In a recession, you would usually expect a fall in the inflation rate due to lower demand and lower economic activity. The inflation rate fell in major recessions like 1929-32, 1981, 1991 and 2020.. However, it is not guaranteed inflation will fall in recession. For example, we could have a period of stagflation – rising …

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Can you print money without causing inflation?

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Readers Question: would you please explain to me how we can have no inflation, or low inflation if the government injects two or three trillion dollars in the US economy and output falls? This is an interesting question. But, you can print money without causing inflation in some circumstances. In short, the reason is that …

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UK Inflation Rate and Graphs

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Current UK Inflation Rate CPI inflation rate:  1.8% (headline rate) CPI – D7G7 at ONS (page updated 19 Feb 2020) Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 1.8% (CPIH – L550) RPI – 2.7% (Jan 2020) …

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Long-Term inflation forecasts

Originally published in March 2015. Current inflation rate (Feb 2020) is 1.3%. I was 0.7% out. But there was no skill in predicting inflation of 2%. If Ii had to predict inflation for 2025, I would predict the same = 2%. Reader’s Question: What will be the inflation rate in 2020? Firstly, I can’t resist …

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What is the optimal inflation rate?

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The optimal inflation rate is often considered to be around 2%. For example: The UK target inflation of 2% +/-1 The ECB target inflation of less than 2% US Federal Reserve target inflation of less than 2% (But from 2020 are likely to make inflation target symmetrical like the UK) Why Central Banks wish to …

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Hedonic adjustment and Inflation

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Hedonics is the science of trying to work out how much product quality has changed and adjusting inflation to take account of the fact more expensive products are not just inflation, but also improved quality. It is used in the US and UK calculation of inflation. If a TV increases in price by 10%, and …

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How do economists try to predict inflation?

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Readers Question: How does the MPC predict future inflation? Inflation is caused by a mixture of demand-pull and cost-push factors. Therefore, the MPC will look at many statistics which give an indication of whether the economy is reaching full employment and causing inflationary pressures. This will include rate of economic growth, unemployment and the amount …

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Can Inflation Cause a Recession?

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Readers Question: Can inflation cause a recession? Inflation is not the main cause of recessions. Usually, recessions are caused by factors such as high-interest rates, fall in confidence, fall in bank lending and decline in investment. However, it is possible that cost-push inflation can contribute to a recession, especially if inflation is above nominal wage …

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