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Stefan Karlsson

'Two Inflationary Days': A clarification

Karlsson responds to readers' comments on his translation of monthly changes to annualized rates in his previous post on inflation.

By Guest blogger / September 17, 2012

Children at Woodcrest Elementary watch a hot air balloon demonstration in Midland, Mich., in this September 2012 file photo. Karlsson writes that including both monthly changes and annual rates gives a better understanding of recent changes.

Jon Garcia/The Saginaw News/AP/File

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I have received a somewhat unexpected criticism regarding my previous post. It's not about any of the statistical facts in it, nor about the point that U.S. inflation is increasing and will likely continue to increase, but about the fact that I, in addition to stating the monthly changes in consumer- and producer prices, also "translated" those monthly changes in to annualized rates. The critics argued that such translation meant that I thought that this would be the yearly change during the coming year, something they argued was implausible, a forecast that I basically agree with as, while it is likely that inflation will increase sharply, it is unlikely to increase that much.

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Stefan is an economist currently working in Sweden.

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But that was not at all what I meant. The reason why I also stated it in annualized terms was that some people mainly or only think in terms of annual or annualized change, so that any change less than 2% is low inflation. By only stating it in terms of the actual change, such readers would get the wrong impression, so by stating both, you create a greater understanding of recent changes. Stating it in terms of the 12 month change would also create a misleading impression since it would include the relatively low inflation months of late last year and early this year.

Now,since I myself don't think that way, I would have otherwise prefered not to make that addition. But if I had simply disregarded the objective of making as many as possible understand and simply expressed it in the way I myself like best, I wouldn't have written any of this in English in the first place, då skulle jag ha skrivit det på svenska.

But since, unfortunately, few people outside of Sweden and certain parts of Finland (plus perhaps Norway and Denmark due to the similarity of their languages to Swedish) understand Swedish, I still write here in English (däremot kan det för svenskspråkiga läsare som eventuellt missat det påpekas att jag på detta ställe bloggar på svenska). Similarly, since some people think in annualized I also express it that way to make them understand, even though I don't think that way.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on stefanmikarlsson.blogspot.com.

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