Article source: ConstructConnect
U.S. current (March) inflation of +8.5% year over year for the All-items Consumer Price Index (i.e., known as CPI-U, with the ‘U’ signifying that it’s for urban consumers) is the highest this century. It’s more than four times greater than the +2.0% figure usually accepted as the desirable target. A little inflation is judged to be a good thing for the economy. Through making it easier to pay off loans, it greases the wheels of industry.
What +8.5% is not, though, is unique in a historical context. From 1951 through 1981, there were 59 months, or the equivalent of nearly five years, in which CPI-U exceeded +9.0% y/y. The most notable periods of extreme inflation occurred from January 1974 through July 1975 and from December 1978 through November 1982. Peak inflation was +14.8% y/y, recorded in March 1980.
There’s a great tradition among economists of arguing over what causes inflation. The discourse has pitted money supply theorists against those who keep a wary eye on excessive fiscal deficits. Plus, there’s the cost-push versus demand-pull impact to be sorted out.
