Why Is Inflation So Low? It’s Missing the Digital Revolution

The digital revolution which keeps a tab on inflation. Technological improvement now means capital goods are cheaper every year.

A Pakistani employee changes the oil prices on a billboard in Karachi on May 1, 2011. ASIF HASSAN/AFP/Getty Images

Central bankers around the world are worried that inflation is too low. “The threat of deflation is firmly on the table,” said European Central Bank’s Mario Draghi recently.

He wants 2 percent inflation for the eurozone. The same goes for the Federal Reserve: “The Committee expects that inflation will gradually return to 2 percent over the next two or three years,” the Fed stated in September.

Instead, U.S. consumer prices haven’t moved in a year. Inflation in the eurozone is also close to zero percent compared to a year ago.

St. Louis Fed