Paul Krugman: Commodities and Inflation, a Misunderstood Pair

Tuesday 22 March 2011

Whenever I write about inflation (or the lack thereof), I get a lot of remarkably angry mail from people who are focused on commodity prices. They just can’t imagine why economists and officials like myself and Ben S. Bernanke, the chairman of the Federal Reserve, appear to be relaxed about others’ inflation fears when the prices of wheat, oil and other commodities have risen so much lately.

Many of my correspondents don’t seem to realize how small a role commodity prices play in determining overall consumer prices. Not that they have zero effect: for example, the price of oil is a big part of the price of gasoline, which in turn has a big impact on consumer prices.