What will inflation be for 2021? Forecasts of inflation on the order of 3% or a bit more are common. They are low.

There are various measures of inflation, all with advantages and disadvantages. I use two here. The first is the Consumer Price Index. This is sometimes called the ‘headline inflation rate’, because it is the index in newspapers’ headlines. It is also the inflation rate used to adjust Social Security payments. The second is the Price Index for Personal Consumption Expenditures less food and energy. This is the measure that the Federal Reserve uses in its comparisons of inflation with targeted inflation and that it provides in its summary of forecasts by members of the Federal Reserve Open Market Committee (FOMC).

The monthly percentage changes in the Consumer Price Index (CPI) for the first half of 2021 are:

It’s not very often that people use monthly inflation rates, so it’s not obvious how to put these numbers in context. As Alan Reynolds notes, there are various ways of doing it, none entirely satisfactory.

A simple question to ask is: What is the inflation rate so far this year? Because these numbers are known and will not be revised, this will give a start on what the inflation rate will be this year. The percentage increase in the CPI so far this year is 3.34%. If prices did not increase at all for the rest of the year, the CPI inflation rate for 2021 would be 3.34%.