I saw an Associated Press article on inflation this week that was picked up by outlets all over the country, from CNY Central here in upstate NY to ABC News.
Anyone who read that article is going to believe things about the current state of inflation that are untrue.
"A measure of inflation that is closely
monitored by the Federal Reserve eased but remained at an elevated level
in October, likely reinforcing the Fed's intent to keep raising
interest rates to cool the economy and slow the acceleration of prices."
The reporter is telling us inflation is still high, and that the Federal Reserve might once again raise interest rates, making it harder for you to afford a car loan or to refinance your mortgage. What is this measure that the Fed closely follows?
"Thursday's report from the Commerce Department showed that prices rose
6% in October from a year earlier. That was the lowest level since last
November and was down from a 6.3% year-over-year increase in September.
Excluding volatile food and energy prices, so-called core inflation over
the previous 12 months was 5%, less than the 5.2% annual increase in
September."
There's a lot to unpack here, beginning with murky writing. Prices did not "rise" 6% in October from last year or any other time. He means to say prices were 6% higher in October than they were in October, 2021. That's not the same thing.
Does the Fed really make interest rate decisions based on where prices are compared to a year ago? If we have a bout of inflation, that year-over-year number is going to remain high until we have a full year with low or no inflation. I hope the Fed looks at where inflation is now and where it seems to be going in the future. I wonder what those numbers show?
"On a month-to-month basis, prices rose 0.3% from September to October. For core prices, the increase was 0.2%."
Well, wait just a minute. Prices didn't rise by 6% in October, they rose by 0.3%. And core prices, the every day staples most of us buy, rose by 0.2%. That's an annual inflation rate of roughly 2.4%. In fact, inflation largely ended after the first half of this year. The monthly rates of increase for July through October were zero, 0.1, 0.4, and 0.4%. That means the annual inflation rate in the second half of this year has been roughly 2.7%. Why didn't he say so?
On a side note, the story makes no mention of income gains, which have eased the effect of inflation. Workers on the lower end of the income scale, who are most affected by rising prices, have made the greatest gains. Prices were 6% higher in October than a year ago? Wages were 6.8% higher, making the effect of inflation on the average family......less than nothing!
His is far from the only article that confuses the math. I have seen a number of similar stories that make it appear that prices are "rising" frighteningly every month. Here's how the BP, the Baker Press, would report this story:
"Inflation, which reached its highest levels since the '80s in the first half of 2022, has eased significantly in the second half of the year. When solid wage growth is factored in, the average American family has felt little impact."
Let's see whose math the Fed uses when they hold their next meeting.
