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Inflation in the United States has turned negative, but there is a dark side to decreasing prices.

Inflation as measured by the U.S. Consumer Price Index (CPI) has turned negative to the tune of 1 percent in October, the sharpest fall since records began in 1947.

Most of the reduction can be “blamed” squarely on the drop in energy prices. Since hitting an all-time high — in both current and inflation-indexed terms — in July, oil prices are now down nearly two-thirds, and nearly all of that reduction has fed through into gasoline prices, which have fallen on average by half.

From most perspectives, the free fall in energy prices is a good thing. Energy prices are often a critical constraint on economic growth, and doubly so in the industrial portions of the economy, so lower energy costs will give businesses and consumers alike some breathing space.


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