(iv) Salary increases below the inflation rate in recent years

Thus, the Fed s 2 inflation objective was born. During the ensuing discussion, several FOMC members argued that the inflation rate might be reduced to less than 2 , but nobody argued that inflation should be pushed higher if a lower, but still positive, rate was achieved.

Zambia from 2004 to 2006, moves from the 18 percent in inflation to the nine percent.

Why, then, are so many central bankers so worried about low inflation rates?

Anti inflation protection must be developed hand in hand with minimum incomes.

Accordingly, a four or five year period of low or high inflation did not have an impact on the expected inflation rate over the actuarial period of the analysis.

The experience with inflation was more mixed, with three regions having somewhat higher inflation in 2004 as compared with 2003 and with three others having significantly lower inflation, particularly in the Pacific island economies.

A more recent indication that inflation targeting has not caused the disinflation seen since the 1990s is the unsuccessful effort by a growing number of central banks to reflate their economies. If central banks are unable to increase inflation, it stands to reason that they may not have been instrumental in reducing it.

The revised rates proposed are, in almost all instances, lower than had been initially foreseen.

If food inflation recedes further, and the headline inflation rate starts to converge on the 3 core (non food) rate, the result will be the equivalent of passive monetary tightening in real (inflation adjusted) terms precisely what the inflation prone Chinese economy needs.

If, say, southern Europe kept its inflation rate at 0 and France inflated at a rate of 1 , Germany would have to inflate by a good 4 , and the rest of the eurozone at 2 annually, to reach a eurozone average of slightly less than 2 . This pattern would have to continue for about ten years to bring the eurozone back into balance.

In the 1980s, Volcker s historic responsibility was to reduce inflation and prevent it from ever rising again to dangerously high levels. Today, Yellen s historic responsibility is to increase inflation and prevent it from ever falling again to dangerously low levels.

Some central banks began to raise interest rates pre emptively, albeit in small steps to counter the risk of potentially higher inflation in 2005, signalling the end of the low inflation, low interest rate environment of the last two years.

The rate of growth has increased significantly inflation has been reduced to a very low level and our situation outside the country has been strengthened.

The rate of so called core inflation (which excludes energy purchases) was 1.8 . Even that understates the impact of energy on measured inflation, because lower gasoline prices reduce shipping costs, lowering a wide range of prices.

Inflation has been soaring, reportedly reaching 560 per cent in the north of the country.

Forget Inflation

All of this implies that if the economy is at full employment and targeted inflation, the federal funds rate should equal 2 plus the rate of inflation. It should be higher if the inflation rate is above the target level and lower if current GDP is less than the full employment level.

Recent inflation in many countries has been the result of higher commodity prices, especially fuel and food prices. In these circumstances, domestic deflationary policies will only further slow growth and are helpless to stem imported inflation.

For example, low and stable rates of inflation enable firms to have longer term horizons in planning their investments.

So the Fed is right to say that inflation is low because of the sharp drop in energy prices but it need not worry about the effect of major trading partners lower currency values. And, again, when the price of energy stops declining, the inflation rate will rise close to the core rate of 1.8 .

Equity markets have performed well globally in an environment of falling interest rates, low inflation and healthy growth in corporate profits.

Beyond Inflation Targets

The Inflation Puzzle

Farewell to Inflation Targeting?

Rethinking Inflation Targeting

An Inflation Reality Check

Is Inflation Returning?

Is Inflation the Answer?

Modern central banking has worked wonders to bring down inflation. Ultimately, however, a central bank s anti inflation policies can work only within the context of a macroeconomic and political framework that is consistent with price stability.

Consumer price inflation in the eurozone has been below target for 22 consecutive months long before the price of oil started collapsing. Cheaper oil is a boon for growth but it also lowers long term inflation expectations, which are the true target of monetary policy.

In November, annual inflation in the euro area fell to a cyclical low of 0.3 , largely owing to the sharp fall in oil prices since the end of the summer. But falling core inflation (which excludes volatile energy and food prices) also points to weak aggregate demand.

The most important component of Abenomics this year has been the BOJ s efforts to ease monetary conditions further, despite zero interest rates, and thus end the threat of deflation. Under these circumstances, inflation expectations are not a cause for concern.

Inflation and interest rates in Japan lately have been even lower than in the US. The most important component of Abenomics this year has been the BOJ s efforts to ease monetary conditions further, despite zero interest rates, and thus end the threat of deflation.

As indicated by the report, the inflation rate of Tajikistan was 3.7 in the first seven months. And the inflation rate in July was 0.6 while such rate in the past year was 6 .

In a more global context, none of this is to dismiss the longer term dangers of inflation. In most countries, at most times, inflation should be kept very low and central banks should anchor inflation expectations with a stable long term target, although the alternative of targeting nominal GDP deserves to be discussed.

The real cost of credit remains high, although it is now declining as interest rates have begun to fall in line with the prevailing lower level of inflation.

11. Inflation grew by 2.1 per cent, the lowest in the past 10 years, while the 4.9 per cent unemployment rate recorded in 1995 was the lowest since the 1989 decennial census of population and housing.

China s New Inflation Constraint

The Ghost of Inflation Future

When Inflation Doves Cry

Programme(s)

Inflation or Deflation?

This is the highest value in years (since June 2012) and the first one above zero since October of last year when a positive 0.2 was posted.

If anything, inflation is now falling further globally as commodity prices adjust downward in response to weak global growth. And gold is following the fall in actual and expected inflation.