Base effect is how much inflation levels have changed from a year ago. It's measured a year back from whatever month you're in (so not right to the day, just the month).
Inflation can be measured for other purposes as month-to-month though. If inflation levels are consistent, and nothing major happens to the market, the levels stay relatively similar from this year May to last year May (or whatever month strikes your fancy). If they vary greatly, that triggers the analyst to look closer. What happened in one of the years that is different? Was there, for instance, a shortage in gasoline that altered the price? A stock market "crash"? If it happened the previous year, the analyst can measure the recovery to this year. Because of the variables from year to year, this isn't the most accurate measurement, but it does at least cue the analyst to look closer.
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Finance: What is Disinflation?4 Views
finance a la shmoop what is disinflation disinflation often confused with dat
inflation refers to the decline in inflation rates over time in 1973
America was fully juiced with Warbucks from Vietnam inflation hovered around [soldiers firing weapons]
the mid going on high single digits and then higher from there like 7% or more
depending on where you look him and Jimmy Carter stepped in on this guy and [Carter walks into office]
raised the federal rates the Fed rates their massively stamping out the wild
bull economy and putting the brakes on inflation but it didn't happen until
after Carter was actually out of office and Reagan took over inflation [Reagan replaces Carter in office]
eventually had rocketed all the way up to about 14 ish percent on an annualized
basis looking at the monthlies in the 1980-81 period right here
well the crux of dis inflation is that inflation is still positive it's just
becoming well less positive and or like you know how you feel not long after you
say I do and the honeymoon is over and you have to take out the garbage so
under Carter the US inflation rates were attacked in a variety of ways the [Carter in a boxing ring]
biggest of which was to make the cost of renting capital very expensive which
cooled the economy but it took a long time like note how slowly inflation
rates came down and well really it was decades before things fully stabilized
you can see how things slowly disinflation the raging levels that
peaked at post-vietnam era 1314 percent then slid all the way down to a 1 to 3
percent way down there where it's hovered for a
while so that's disinflation still inflation but just less of it deflation [Disinflation deflating]
is when inflation turns negative like prices are actually declining and yes
we've had periods of deflation before albeit very short ones like in the post
mortgage crisis Mallove's in 2009 right here yes yes it's rare but it happens
got it okay class dismissed
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