0
$\begingroup$
  1. The way I understand, inflation rate is the change of Consumer Price Index per given period of time. Is this correct?

  2. What's the different between inflation rate of the economy of a country vs. inflation rate of a currency. For example: At the time of writing this, inflation rate of Unites States is 2.49% vs Inflation rate of US Dollar is 4.99%

  3. Which one do people usually compare with, when talking about interest rates?

$\endgroup$
1
  • 2
    $\begingroup$ Different sources and different times. 2.49% was at January 2020. 4.99% was at May 2021 $\endgroup$
    – Henry
    Jun 24 at 16:10
1
$\begingroup$

The way I understand, inflation rate is the change of Consumer Price Index per given period of time. Is this correct?

No inflation is positive change of aggregate price level (typically measured by CPI). If CPI increases by $5\%$ that is inflation. If it decreases, lets say the change is $-5\%$ that is deflation. Following Mankiw Principles of Economics pp 13:

Inflation an increase in the overall level of prices in the economy


What's the different between inflation rate of the economy of a country vs. inflation rate of a currency. For example: At the time of writing this, inflation rate of Unites States is 2.49% vs Inflation rate of US Dollar is 4.99%

There is no such thing as a separate inflation rate of US Dollar currency (meaning there is no separate inflation rate just for currency that can be divorced from economy). All inflation rates that are calculated from CPI based on prices quoted in USD measure change in value of US dollar, it’s not like one of them is all uber ales. Any inflation rate has to be calculated for some economy as you need prices to calculate it so it cannot exist separately from some economy.

You can calculate inflation rate, for a village, for a metropolitan area, for a state for a region, for a country or for a group of countries etc but you have to define some economy where you will be collecting data on prices. If the CPI was constructed from prices quoted in the USD they all measures change in value of dollar.

The $4.99\%$ rate reported by Wikipedia is not inflation rate for US dollar but for USA. Based on the source listed on Wikipedia that is inflation rate of USA in May 2021.

The $2.49\%$ rate reported on the other Wikipedia page is the rate for the USA in January 2020.

In addition the $2.49\%$ rate was taken from the World Bank whereas the $4.99\%$ rate is from U.S. Bureau of Labor Statistics and the two might not necessarily follow the same methodology when calculating it (e.g. no inflation measure actually looks at all prices, when we discuss inflation, as measured by CPI we are talking about estimates of what the inflation rate is).


Which one do people usually compare with, when talking about interest rates?

As explained in the previous section there is no such thing as US dollar inflation. People look at inflation rates for an economy they are interested in. When it comes to different methodologies of how to estimate inflation it is always case dependent.

If you are asking as a consumer (e.g. you want to calculate real interest rate for you from nominal one for some purchase etc) and you are not interested in using data for some analysis, most relevant will be inflation rate for your city (if available) or for the area where you live, but it ultimately depends on what do you want to use the number for.

$\endgroup$
2
  • $\begingroup$ Thanks for the answer. The link "Inflation" left of 4.99% in the Wikipedia article points to en.wikipedia.org/wiki/Monetary_inflation, which appears to be a different concept than the inflation (or price inflation, according to the description there) we talk about here. But the number 4.99% is the (price) inflation of USA (as you mentioned), which I think is a bit misleading. Is my understanding correct? $\endgroup$
    – Amila
    Jun 24 at 19:45
  • 1
    $\begingroup$ @Amila monetary inflation is not term used very frequently in modern research but it is a synonym to money supply increase if I remember correctly. That is completely different concept from inflation. And yes the number 4.99% is just change in CPI january 2020, you can see that on the right grey panel on the wikipedia page under the number inflation there is source which first sends you towards some weird website, and that website just says its inflation data are from US. BLS so that should be primary source of that stat $\endgroup$
    – 1muflon1
    Jun 24 at 20:28

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.