Wednesday, February 28, 2018

Four Decades Of Disinflation

Disinflation is when the inflation rate falls. Prices rise each year or time period, but the rate of increase falls. The table below shows the annual  average inflation rate for decades starting with the 1950s. The 1970s had the highest average of 7.41%.

1950s 2.25% 6.00% -0.70%
1960s 2.53% 6.20% 0.70%
1970s 7.41% 13.30% 3.30%
1980s 5.14% 12.50% 1.10%
1990s 2.92% 6.10% 1.60%
2000s 2.54% 4.10% 0.10%
2010s 1.68% 3.00% 0.70%

Starting with the 1980s, each decade has had a lower average than the previous decade. For the 2010s to end up having a higher average than the 2000s, the inflation rate would need to average about 6% over the years 2018-19. That does not seem likely. So we should end up with four decades of disinflation.

The graph below shows the annual inflation rate since 1914.

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