Inflation Rates

The CPI has just been published, and the usual nonsense about “inflation going up” has followed.  In twelve months the index has risen from 131.5 to 135.4, i.e. 3% up from 2.5% last month.

However, the index in December 2023 was 132.2 and the 2.5% took it to 135.6 last month.  If this increase of 3.4 points were evenly spread over the year, that would be 0.28 per month and if we add that to the December 2023 figure we get 132.48.  The increase from there to the current index of 135.4 (prices actually fell between December and January this year, as last) is 2.2%, which suggests that inflation is falling rather than rising.  However, if  the press continues to ignore the effect of the month that drops out of the index each time, the rate will be understated in some of the months to come.