Inflation, the Fed, and the Big Picture

CAMBRIDGE – Inflation – its causes and its connection to monetary policy and financial crises – was the theme of this year’s international conference of central bankers and academics in Jackson Hole, Wyoming. But, while policymakers’ desire to be prepared for potential future risks to price stability is understandable, they did not place these concerns in the context of recent inflation developments at the global level – or within historical perspective.

For the 189 countries for which data are available, median inflation for 2015 is running just below 2%, slightly lower than in 2014 and, in most cases, below the International Monetary Fund’s projections in its April World Economic Outlook. As the figure below shows, inflation in nearly half of all countries (advanced and emerging, large and small) is now at or below 2% (which is how most central bankers define price stability).

Most of the other half are not doing badly, either. In the period following the oil shocks of the 1970s until the early 1980s, almost two-thirds of the countries recorded inflation rates above 10%. According to the latest data, which runs through July or August for most countries, there are “only” 14 cases of high inflation (the red line in the figure). Venezuela (which has not published official inflation statistics this year) and Argentina (which has not released reliable inflation data for several years) figure prominently in this group. Iran, Russia, Syria, Ukraine, and a handful of African countries comprise the rest.