Readers question: should the government focus on achieving a particular macroeconomic objective over the others? This is a good question. There is a lot that can be said because it encompasses so many different topics. Firstly, the three main macro-economic objectives: Higher economic growth Low inflation Low unemployment There are also less important objectives Reducing …
Readers Question: Would it be possible for a nation to claim that is reducing inflation rate successfully through economic measures, however at same time is allowing increase of commodities prices such as bread, meat, and etc… Firstly a fall in the inflation rate, means prices are still rising. Just at a slower rate. For example …
The ECB inflation target is 2% – ‘it aims to maintain inflation rates below, but close to, 2% over the medium term. ‘ However, some economists argue that in the current situation, the ECB should have a higher inflation target of 3-4%. The main reason for having a higher inflation rate would be to prioritise …
Readers Question: How does inflation targeting operate when there is a deflation? and what are the problems associated with this? It’s a good question to ask at the moment, especially with regard to the ECB and Eurozone. Firstly, the EU inflation target is – below but close to 2%. If inflation falls below 2%, the …
The Eurozone inflation rate is 0.4% (ECB database) (Sept 2014) Eurozone HCIP inflation rate HCIP (Harmonized consumer index prices) Source:| (ECB Inflation graphs, sometimes a few months outdated) Food inflation Food inflation is currently negative. Food inflation tends to be one of the most volatile components. This negative food inflation is one factor reducing the …
Readers Question: Why is house price inflation considered good while other forms of inflation are considered bad? Or are all forms of inflation bad for the economy? House price inflation has a mixed impact on the economy depending upon the extent and timing of the rise in house prices. This graph shows house price …
The basket of goods reflects the most commonly bought goods in an economy. When calculating inflation, statisticians check these 1,000 most commonly bought goods and multiplier price changes by their respective weighting. There is an interesting interactive graph here at the NYT showing the different components of the US basket of goods, used to calculate …
An interesting question at the moment is to what extent does temporary cost-push factors lead to a permanent rise in underlying inflation? Temporary cost-push factors include rising commodity prices, rising food prices, higher taxes. These goods are often volatile so the increase is often temporary. In the case of taxes, the price increases last for …