Monthly Inflation Report

Inflation is an increase in the general level of prices. Higher prices mean that a dollar buys fewer goods and services than it did in the past.

Since inflation was low and relatively stable over much of the last three decades, most Americans grew accustomed to adjusting wages and prices at more-or-less the same rate each year. However, higher inflation over the last year and the likelihood that inflation will remain high in the near future means we should think more carefully about the value of the dollar when entering into long term contracts. Workers should think about inflation when deciding whether and how much to work for an offered wage or salary. Businesses should think about inflation when making purchase agreements. Borrowers and lenders should think about inflation when deciding how much interest they are willing to pay or accept.

In the FAU Monthly Inflation Report, we present several key indicators related to inflation in order to help people renegotiate existing employment, purchase, and lending contracts or enter into new contracts more confidently. Specifically, we…

• Compare the most recent data on the price level to the price level that would have resulted if prices had merely grown at 2 percent since January 2020.
• Offer forecasts of the price level based on projections from the Federal Reserve’s monetary policy committee.
• Estimate the expected annual rate of inflation over the next five- and ten-year periods based on prevailing prices in bond markets.

Taken together, the indicators presented in this report help one form a clear picture of how prices have evolved in the recent past and the extent to which they are likely to rise in the near future.

The FAU Monthly Inflation Report is produced by Dr. William J. Luther with Morgan Timmann.

William J. Luther is an associate professor of economics at Florida Atlantic University, director of the American Institute for Economic Research’s Sound Money Project, and an adjunct scholar with the Cato Institute’s Center for Monetary and Financial Alternatives. The Social Science Research Network currently ranks him in the top five percent of business authors. He earned his MA and PhD in Economics at George Mason University.

Morgan Timmann is a Master of Science in Economics student, Graduate Teaching Assistant for the Economics Department, and CLASS tutor at Florida Atlantic University.