Inflation.

Derivative

I've been playing around with historical inflation data in Excel.
1948-present RPI index. I thought it might be valuable for some on the forum, rather than languishing on my hard drive.

Worst and best cases for annual inflation in specific time periods.

5 years: Best 2.2%, Worst 16.5%
10 years: Best 2.4%, Worst 14.3%
20 years: Best 2.8%, Worst 10.2%
30 years: Best 3.7%, Worst 8.2%
40 years: Best 6.3%, Worst 7.2%

50 years was a bit daft; not enough data. The total average was 5.6%.

A graph:


For clarity, the percentage quoted represents the amount of annual inflation you would expect between the date on the x axis and the following 5/10/20/30/40/50 year time period.

For example, the 5 years following January 1973 had an average inflation rate of 16.5%.

To me, this makes the current 'target' of 2% look very low historically, and also makes me question whether the figures are being manipulated. I know that my own personal rate of inflation has been far higher than the 3% quoted - and it also has been in most of the hard hitters (housing, transport).

melbury

I have always thought that these figures are being manipulated.
Like you, my personal rate of inflation far exceeds the paltry stated levels:(:(

Milarky

'Fuzzy Numbers'

(anchor those expectations..)

Surprinsingly good official channel though.

See this clip (from 2011)

Xbigman

Personal inflation is impossible to quantify. Certainly I've had some things rise at a frightening speed. IE gas and electric. But others are static. My mortgage rate may vary with interest rates but it isn't effected by inflation. Neither is my (fixed) loan.

So imagine half my expenditure is effected by inflation at 5% and the other half is not effected by inflation. That would be 2.5% overall. If I had no loan and I rented, it would be a different story.

The official govt statistics might not suit all circumstances but they do provide a fairly consistent benchmark over time.



Darren

Nicholas-bloody-Parsons

Thanks. Looks like inflation low hit in the 1990s and has been trending higher ever since. Scary.

Although i think i would do it the opposite away round. ie, work out the average inflation using the preceding 5/10/20/30/40/50 year time period.

The way you have done it gives it a forward looking bias, which is probably more interesting.