How High Will Inflation Be in 2021?

Gerald P. Dwyer – August 6, 2021

 

What will inflation be for 2021? Forecasts of inflation on the order of 3 percent or a bit more are common. They are low.

There are various measures of inflation, all with advantages and disadvantages. I use two here. The first is the Consumer Price Index. This sometimes is called the “headline inflation rate” because it is the index in newspapers’ headlines. It is also the inflation rate used to adjust Social Security payments. The second is the Price Index for Personal Consumption Expenditures less food and energy. This is the measure that the Federal Reserve uses in its comparisons of inflation with targeted inflation and that it provides in its summary of forecasts by members of the Federal Reserve Open Market Committee (FOMC).............. 

A simple question to ask is: What is the inflation rate so far this year? Because these numbers are known and will not be revised, this will give a start on what the inflation rate will be this year. The percentage increase in the CPI so far this year is 3.34 percent. If prices did not increase at all for the rest of the year, the CPI inflation rate for 2021 would be 3.34 percent............Inflation will be noticeably higher in 2021 than it has been in some time. An important question is whether it will be followed by the widely predicted lower inflation or by higher inflation in subsequent years...........To Read More....