Deflation Inflation

Inflation isn’t something to worry about right now.

Deflation Inflation

We all worry about the economy and how it's going to impact our finances, but there's one aspect that you shouldn't be wringing your hands over just yet: Inflation. Yes, at times it seems like there is inflation — the cost of gas is high! Bread is expensive! — but that's not really what is happening.

To figure out inflation, you need to look at a few different things. First, check with the government's official reading. According to USA Today, the consumer price index, which is the the government's tool for gauging inflation, has only risen 1.7 percent in the past 12 months. That's way below the CPI's average annual growth of 2.5 percent. Then there's our annual wages. According to the Labor Department, average annual wages only grew — well, they didn't grow at all, during the last 12 months. Wage growth sat at 0.0 percent. So while yes, gas prices are up, you don't have the rising wage to accommodate price jumps like that, so you cut back in other ways. When we all do that, companies are eventually forced to cut back on the price of items so that they sell. It's a cycle that keeps inflation down.

Just as low wages mean inflation is down, an uptick can mean inflation will take place soon. Another thing you can keep an eye on is the interest rate of long-term bonds. When traders think inflation is coming, they'll sell bonds, which forces their rates higher. But the rate on a 10-year bond is currently at a measly 1.67 percent, meaning they don't think inflation is a risk.

This all means inflation — while sort of scary and intimidating — isn't something to be concerned about. For now! Sorry, we like to keep you on your toes.

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