Journal Article

Rising relative prices or inflation: why knowing the difference matters


Abstract: Almost everyone uses the word inflation to refer to any increase in prices, but it ought to be reserved for a just one kind of price increase. True inflation has a different cause?and a different cure?than the price increases of goods and services caused by constantly changing supply and demand conditions. The Federal Reserve can and should act to control inflation, but when relative-price changes are putting pressure on businesses and consumers, the Fed can do little.

Keywords: Consumer price indexes; Inflation (Finance);

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Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2008

Issue: Jun

Order Number: 1