http://krugman.blogs.nytimes.com/2011/09/24/a-quick-note-on-inflation/People like Greg Mankiw are relaxed about the inflation situation;
I’m worried that it will get too low. But there are always people popping up in various places arguing either that (a) the official numbers vastly understate true inflation or (b) recent inflation has been pretty high, and we should be worried about it going still higher.
...we now have inflation estimates that are completely independent of the official numbers, such as the
Billion Price Index. What’s that index saying? Just about the same as official inflation (not exactly the same, because the coverage is different):
Of course, if you think that the MIT guys are also in on the conspiracy …
Now, what about that 3.8 percent rise in the CPI over the past year? Well, if you look at the detail, you see that it’s very largely about commodity prices — oil mostly, but also to some extent food, and even the bulge in apparel prices is probably mainly about cotton.
And all that is history — it’s the bulge of late 2010 and early 2011 working its way through the pipeline. And that commodity price boom didn’t persist; indeed, it’s gone into reverse.
All of that is the reason the markets don’t see a lot of inflation looking forward — and neither do I.