Economic Forecasting - Essay Example

The annual inflation rates in the US in the decade starting 2004 can be seen in Fig. 1. In this graph, the Bureau of Labor Statistics (BLS) published Current Consumer Price Index has been used to calculate the rates of inflation. Fig. 1 shows that in the last decade, the maximum inflation rate in the US has been recorded at 4.1% in 2007 whereas the lowest inflation rate was recorded at 0.1% in 2008. Coincidentally, the highest and the lowest values of inflation rate in the US have been recorded in one year from the start to the end of 2007.

This may be attributed to the fact that the global financial recession had started in 2008, which is also why, the maximum variation in the inflation rate in one year was recorded from 2008 to 2009 when it soared up from the lowest 0.1% straight to 2.7%. The second largest variation was recorded from 2006 to 2007 when the inflation rate at increased from 2.5% to 4.1%. The year from 2010 to 2011 showed the third largest increase in inflation rate in the US from 1.5% to 3%. There has been very little variation in the rate of inflation in the US in the years from 2012 to 2014 compared to the preceding years when the rate of inflation unpredictably jumped up or down from one year to the next from 2005 to 2012.

The annual inflation rate in the US was recorded at 1.7% in October 2014 for the third consecutive month because the decline in prices of energy sufficiently offset the increased costs of food and shelter. Energy prices year-on-year reduced 1.6% with a drop in the cost of fuel oil and gasoline by 6.5% and 5% respectively whereas the cost of food saw an increase by 3.1% (Trading Economics, 2014). Following an increase of 1.7% in the previous month, the index for all items less energy and food increased by 1.8%. There was seen an increase in the cost of services less energy by 2.

5% with the index of transportation and shelter increasing by 1.8%