The cost of living is rising, but we’re far from runaway inflation

at 04:52 PM ET, 10/19/2011

Social Security benefits are increasing for the first time since 2009, rising 3.6 percent after cost-of-living adjustments. The increase was largely fueled by a spike in energy and food prices. But economists say they don’t expect that inflation will be a major problem in 2012.


(SOURCE: ASSOCIATED PRESS)
The marked increase in the cost of living partly comes as prices are still recovering from the peak of the recession, when low housing and fuel prices had a dampening effect, according to Jeet Dutta, a senior economist at Moody’s Analytics. “Because there was such severe disinflation during the great recession, the value didn’t get past the pre-recession peak until recently,” Dutta said. In 2011, however, political unrest in the Middle East helped send oil prices up, and severe weather conditions—including droughts in many place of the world— contributed to rising food costs, he said.

But Dutta said that he doesn’t believe that inflation will continue to rise unchecked in the near future, as energy and commodity prices have already receded. The troubles in the global economy are also likely to keep rising prices in check, he said, given the ongoing crisis in Europe, the slowdown in China and the sluggish recovery in the United States.

Social Security benefits aren’t expected to budge much, either, said Paul Van de Water, a senior fellow at the left-leaning Center for Budget and Policy Priorities. “Inflation probably will stay low for the next several years, and the expectation is for a relatively small [cost-of-living adjustment] next year,” he said.

That’s all in line with what the consumer price index tells us: Inflation has risen in the United States since 2009, but it’s still relatively low.
(SOURCE: FEDERAL RESERVE ECONOMIC DATA)

 
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