US CPI: 1971 – Present, 1921 – 1971

CPI is changing in terms of inclusion of new calculations to generic drug prices, quarterly chained link and other changes. For the past 100 years since 1921 and 1913 inception, CPI was calculated as a simple average. Medical Care, Wage earners and clerical were first categories in the 1913 inception. CPI began to separate in 1935 by viewing City Averages. Seasonally Adjusted began in 1947 while Less Food and Energy began calculations in 1957. As the US grew, an index was incorporated to measure prices and items in the index were included and excluded as item popularity waxed and waned. Today’s index was constructed in 1982 /1983 with a base of 100. In 1997 for example hospital services were included in the index alongside a geometric mean formula. Inflation rates were measured below in simple averages.

The Fed Statement stated 2% Inflation target would be seen in the medium term.

In 45 years from present day to 1971, the best months ever seen in headline CPI was 40 years ago at 1.8 and 1.5 and those months were severe anomalies. Inflation was above 1.0 exactly 31 times in 45 years. Inflation was negative 60 months in 45 years and 32 months since 2005. Inflation was negative 25 months in the last 84 and 10 months in the last two years. In the last seven years, Inflation ranged from positive 0.6 – negative 0.6 and achieved 0 in 30 months of the last 540 months.

The 45 year average is found at 0.33 while the range in 14 averages from 1 -50 is found between 0.33 – 0.06. Headline CPI averages from 1 – 10 years to include the three and seven year for a total of six align as 0.1, 0.04, 0.069, 0.1183, 0.133, 0.1466. Averages from 15 – 45 years to include an average every five years after 15 for a total of seven averages align as 0.1683, 0.1770, 0.1860, 0.2119, 0.2376, 0.3008 and 0.3307.

CPI less food and energy from averages 1 – 45 range from 0.33 – 0.1. Averages from 1 – 10 years to include the 3 and 7 years align as 0.175, 0.1541, 0.1633, 0.1476 and 0.1583. Averages from 15 – 45 to include averages every five years after 15 align as 0.1638, 0.175, 0.2060, 0.2241, 0.2528, 0.3112, 0.3371.

From 1921 – 1971, Inflation was negative 113 months of 600 or 50 years. In 227 months, Inflation was zero. Inflation was above 1 in 35 months. The 50 year average is 0.1186. The range within averages 1 year to 50 is found between 0.9 – 0.02.

In 100 years or 1200 months, Inflation was negative 173 months and zero in 256 months.

Inflation rates in the United States hasn’t seen a problem in 100 years and for the most part has been fairly contained within long term averages.

Brian Twomey, Inside the Currency Market, btwomey.com