And core inflation measures show no sign of accelerating inflation either.

In the first place, use of a core inflation indicator should be put aside.

Today, the debate is over core inflation, which excludes food and energy prices because they are too volatile.

At the same time, there has been a notable deterioration in underlying core inflation, which strips out food and energy prices.

At the same time, there has been a notable deterioration in underlying core inflation, which strips out food and energy prices. Annual core inflation for Asia (excluding Japan) was running at a 4 rate in late 2010 up about one percentage point from late 2009.

A key lesson from the Great Inflation of the 1970 s is that central banks can t afford a false sense of comfort from any dichotomy between headline and core inflation.

At 6.5 , the one year lending rate is now 0.3 above August s headline inflation rate.

Monetary policy needs to look beyond its core focus on low and stable inflation and pay much greater attention to financial stability.

The European Central Bank s policy rate stands at 0.75 , while the eurozone s annual inflation rate is 2.5 .

Even when we look at core inflation, real interest rates in the US are still deep in negative territory.

If the underlying price trend is added to this, it is easily understandable why inflation rates are currently coming down everywhere.

Given that food and energy prices respond to monetary developments, and thus are not exogenous, the concept of core inflation obviously becomes problematic, to say the least.

At that point, the Fed can focus on its fundamental mandate of preventing a rise in the rate of inflation.

Given weak demand in slow growing advanced economies, rising commodity prices may lead only to a small first round effect on headline inflation there, with little second round impact on core inflation.

By the start of 2008, it was clear that controlling inflation and cooling an overheating economy had become the government s main economic target.

Annual core inflation for Asia (excluding Japan) was running at a 4 rate in late 2010 up about one percentage point from late 2009.

Monetary policy needs to look beyond its core focus on low and stable inflation and pay much greater attention to financial stability. The debate now is how, exactly, to factor this imperative into monetary policy, and how to coordinate the work of monetary and regulatory authorities.

But, with a coming decline in headline inflation and mounting concerns about growth, the PBC is likely to prove a bit more accommodating in the second half of 2011.

Short term emergency policies are needed to deal with high unemployment, home foreclosures, business bankruptcies, and often with hunger, disease, and a number of other ills. Emergency or humanitarian policies may improve basic consumption in the short run, but they may also discourage investment, increase inflation, and lower prospects for economic in the long run.

The Inflation Puzzle

The Bogey of Inflation

The loose monetary policies of the early 1990s pushed inflation to hyperinflationary levels.

The 4 Non Solution

An Inflation Reality Check

Inflation Comes to China

Inflation is Now the Lesser Evil

Inflation or Deflation?

Is Inflation Returning?

The Ghost of Inflation Future

Inflation is under control.

During the low inflation era, which dates from the early 1990 s, developed country annual inflation rates averaged 2.4 . Central bank inflation targets are now normally set at 2 .

By contrast, inflation hawks argue that inflation must be attacked preemptively. While most central banks are inflation hawks, this stance is a matter of religion, not economic science.

There is much to say for using core inflation in conducting monetary policy and explaining decisions to the public, but only when price increases of food and energy which core inflation strips out are temporary in nature.

Beyond Inflation Targets

Asia s Inflation Trap

Forget Inflation

Is Inflation the Answer?

The Failure of Inflation Targeting

When Inflation Doves Cry

But interest rates are at rock bottom levels even lower than in January 2009 while core inflation has slowed to a pace unseen since the early 1960 s.

In other words, the low inflation era will become the lower inflation era.

The Exaggerated Death of Inflation

Rethinking Inflation Targeting

China s Inflation Muddle

Farewell to Inflation Targeting?