Inflation And Analyses Of Monetary Policies

Inflation and Analyses of Monetary Policies

‘Inflation is a rise in the general level of prices. When inflation occurs, each dollar of income will buy fewer goods and services than before.’ Rising prices does not necessarily mean there is inflation. (McConnell, Brue, & Flynn, 2015). To me this analysis was a wake up call. It not only helped me understand and learn what inflation is, but also seemed to guide me towards being more practical about my expenses. The reason why I defined inflation at the very beginning is basically to explain what we do wrong on a daily basis without knowing how much it is hurting us.

I am a full time student, along with a full time employee. Everyday of my life is full of work and responsibilities, which is why I am always on the run. To keep myself healthy and most importantly, what I purchase the most is food. I decided to base my analysis on food that we bring home to prepare. It is comprised of things, for example, grains, bread shop items, meats, poultry, eggs, natural products, vegetables, drinks, sugars and desserts. This classification was picked due to its applicability and straightforwardness in surveying its effect in connection with our assessed normal month-to-month and yearly utilization at home. This thing makes up what are named as unpredictable classifications and is barred from the center buyer value record together with items found in the vitality class. This unpredictability is pleasing in the arrangement exhibited underneath for the period under survey (Jo, J., and Lusk, J. L., 2016).

Food at Home

Base Year

Subsequent Year

1995

2005

2010

2015

Annual Average

148.42

189.8

215.84

242.25

Percentage Change

0%

28%

45%

63%

The annual average for food was 148.42 in 1995, ascending to 189.8 in 2005, then achieving a much higher rate of 215.84 in 2010, and then settling at 242.25 in the year 2015. The patterns show an incremental ascent in the ‘nourishments at home’ class throughout the years under appraisal. Utilizing 1995 as the base year for assessment, there is a 28% rate increment over the time of 1995 to 2005.

The circumstance is even severer over the resulting time frames as it ascends to 45% and 63% between the times of 1995 to 2010 and 1995 to 2015 separately. This development establishes that the costs of the things in this class definitely expanded over that period implying that the acquiring force of the normal family unit, ceteris paribus, radically decreased as to the ‘sustenance at home’ classification. The list expanded a rate of roughly 20% over the three time frames from 1995 to 2015 (Jo, J., and Lusk, J. L., 2016).

Trends in Inflation

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Annual Ave

2016

1.4

1.0

0.9

1.1

1.0

1.0

0.8

1.1

1.5

1.6

1.7

2.1

1.26 %

2015

-0.1

0.0

-0.1

-0.2

0.0

0.1

0.2

0.2

0.0

0.2

0.5

0.7

0.12 %

2014

1.6

1.1

1.5

2.0

2.1

2.1

2.0

1.7

1.7

1.7

1.3

0.8

1.62 %

2013

1.6

2.0

1.5

1.1

1.4

1.8

2.0

1.5

1.2

1.0

1.2

1.5

1.47 %

2012

2.9

2.9

2.7

2.3

1.7

1.7

1.4

1.7

2.0

2.2

1.8

1.7

2.07 %

Inflation 2012

Of interest for this analysis are the annual average figures contained within the on top of tabulation, though the monthly figures are accustomed make a case for the final annual average. It’s additionally necessary to notice that whereas inflation happen when prices rise compared to the previous year, annual disinflation or deflation happens when prices are slightly under their previous periods. Though this seldom happens on an annual basis.

Of all the periods in review, this is often the sole one wherever the index was on top of the FED target of 22 by closing at an annual average of 2.07%. Inflation was highest throughout the beginning of the year at 2.9% however settled at low of 1.7%. This means that prices of commodities reduced towards the end of the year.

Inflation in 2013

The year started at 1.59% however fell to a low of 0.9% and ultimately finished the year at 1.5%. The annual average is 1.47% that is less than the previous year.

Inflation in 2014

The first quarter had the highest rate, which is common for many years though monthly inflation usually once into disinflation for the following months of July to November finally sinking at an annual rate of 1.62%. This is often an increase from the previous dip of .47 intimate in 2013.

Inflation 2015

For the primary time since 2009, January 2015 intimate an annual deflation wherever the costs recorded was under they were the year earlier. This resulted attributable to the lower prices of energy and it had been useful to customers as a result of it resulted in lowered prices of commodities.

Inflation 2016

The rate of inflation for the year of 2016 recorded to be the fasted pace over a four year amount, though it settled at 1.26% that was a lower rate than that in 20012 of 2.07% This quick pace was accelerated by five continuous months of a rise within the price of living. this implies that buyers had to pay additional from their income to get an equivalent kind of product because the previous years. a rise within the value of hydrocarbon over the amount hastened this increase compared to the opposite years that saw a far lower worth.

Impact of 2012 – 2016 Inflation Rates

Generally, once checked out on an annual basis, inflation is typically terribly low and deflation rarely happens notably on an annual basis, though it will happen additional typically monthly (Ley, E., 2001). The above indices show that the extent of inflation usually unfit over the course of the amount in review. It reached a low of 0.12% in 2015 primarily because of the reduced price of energy product. This was a serious profit to our family as a result of the value of gas had become rather high. The reduced prices helped ease the money burden as our family’s financial gain had not up over the amount. This left additional income to get different commodities that was not antecedently potential.

How Business & HR Managers Use CPI Statistics

“Consumer Price Index (CPI) is an economic measure that looks at the average change in prices paid for a particular basket of goods and services over time. The CPI is used as a macroeconomic indicator, a deflating tool and a way of adjusting monetary values. It is not a cost of living index” (Market Basket, 2017). According to the Bureau of Labor Statistics (BLS), “the CPI can be used as a deflator of other economic series. The CPI and its components are used to adjust other economic series for price change and to translate these series into inflation-free dollars.” The CPI, shopper index number, additionally called the value of living index, is of abundant importance to mangers and above all to human resources managers. Except getting used to point whether or not inflation has up or not, it’s additionally accustomed calculate the bucks getting power (Boskin, M. J., et. al., 1998). Once the CPI rate goes up it means the basket {of production products} found in its economic series has increased and it thus means individuals area unit outlay additional to get an equivalent goods. Its intrinsic nature lends it to being associate degree claim agent of the worth of the greenback by indicating its getting power. This implies that the government in conjunction with different agencies uses it to see whether or not there’s a necessity to extend the value of living. Not only that, but the government furthermore uses it to regulate tax rates and retirement edges. It is additionally accustomed confirm whether or not workers need a raise to match the modification within the price of living. Moreover, it affects a union talks profit and it will work to their favor or against them. This implies that the index is of nice importance to human resource managers as they’re tasked with administering on matters with reference to the staff welfare like wages and edges

Conclusion

The data derived from CPI is becoming more accurate as the years go by. However, this data has facilitated the American economy make serious decisions and also help accumulate heaps of research regarding trends in inflations. So in conclusion, based on my research analysis we can see that as the consumer prices may raise, the cost of living increases as well. I hope my research analysis helped you understand the significance of inflation and why it should be taken seriously.

References

1. Boskin, M. J., Dulberger, E. R., Gordon, R. J., Griliches, Z., & Jorgenson, D. W. (1998). shopper costs, the patron index number, and also the price of living. The Journal of Economic views, 12(1), 3-26.
2. CPI Index information retrieved from URL: http://www.usinflationcalculator.com/inflation/us-inflation-climbs-2-1-in-2016-quickest-annual-rate-since-2011/10002803/
3. Haan, J. d. (2002). Generalised fisher price indexes and the use of scanner data in the consumer price index (CPI). Journal of Official Statistics, 18(1), 61. Retrieved from https://search.proquest.com/docview/1266793992?accountid=458
4. Jo, J., & Lusk, J. L. (2016). Predicting food costs victimisation information from shopper surveys and search. In elite paper ready for presentation at the Southern Agricultural social science Association (SAEA) Annual Meeting, San Antonio, Texas.
5. Ley, E., International money, & United Nations agency Institute. (2001). Whose inflation?: A characterization of the CPI rich person bias. Washington, D.C.: International money, United Nations agency Institute.
6. Market Basket. (2017). Investopedia. Retrieved from http://www.investopedia.com/terms/m/market_basket.asp
7. McConnell, C.R., Brue, S.L., & Flynn, S.M. (2015) Economics: Principles, Problems, and Policies (20th Ed.). Boston, MA: McGraw-Hill/Irwin.
8. U.S. Bureau of Labor Statistics (2016), Consumer Price Index, retrieved from https://www.bls.gov/cpi/cpiovrvw.htm