Inflation Rate Based on CPI

In this graph, we see the CPI from 1950 to 2015. In times of recession (the grey areas), CPI takes drastic dips. Thus, the inflation rate decreases drastically as well. While it is not considered beneficial to the economy to have a high inflation rate, a very low one is not good either. More often than not, low inflation is a reflection of other problems in the economy. For example, when companies do not raise prices, it could be because people are not making enough money or none at all (unemployement). Our nation's central bank, The Federal Reserve, tries to regulate the inflation rate as much as possible. Failure to do so will result in the CPI steadily dropping and eventually falling below zero percent - otherwise known as deflation.