21 November 2006


The most widely used (althougn not necessarily most accurate) measures of inflation are the Consumer Price Index for All Urban Consumers (CPI-U) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Prices almost always increase over time. But, both indexes fell in October. The CPI-U fell 0.5% to 201.8, the CPI-W fell 0.7% to 197.0.

This could be a one month wonder, but is notable enough in and of itself. A most stable measure, which compares the CPI in October of this year, to October a year ago, shows the CPI-U up a modest 1.3%, and the CPI-W up 0.9%.

It is hard to remember that our more recent experience, of interest rates hovering at or near the inflation rate, are the exception and not the norm. Now, you can save money in a certificate of deposit at about 5% interest, and inflation is about 1%, so there is a positive rate of return even after taxes and inflation.

No comments: