How high will inflation be in 2021? – The Property Chronicle
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How high will inflation be in 2021?

The Professor

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%.

The Professor

About Gerald P Dwyer

Gerald P Dwyer is a Professor and BB&T Scholar at Clemson University. From 1997 to 2012, he served as Director of the Center for Financial Innovation and Stability and Vice President at the Federal Reserve Bank of Atlanta. Dwyer’s research has appeared in leading economics and finance journals, as well as publications by the Federal Reserve Banks of Atlanta and St Louis. He serves on the editorial boards of the Journal of Financial Stability, Economic Inquiry and Finance Research Letters. He is a past President and member of the Executive Committee of the Association of Private Enterprise Education. He is also a founding member of the Society for Nonlinear Dynamics and Econometrics, an organisation for which he served as President and Treasurer. Dwyer earned his PhD in Economics at the University of Chicago, his MA in Economics at the University of Tennessee, and his BBA in Business, Government and Society at the University of Washington.

Articles by Gerald P Dwyer

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