The blue line represents all items in the price index and the red line corresponds to all items except energy prices, which dropped significantly in mid-2008 to mid-2009 due to a fall in demand before bouncing back.

BLS: Core Inflation Saw “Smallest 12-Month Increase In The History Of The Index” In October. In its monthly consumer price report, BLS stated:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.2 percent before seasonal adjustment.

[...]

The index for all items less food and energy was unchanged in October, the third month in a row with no change. The indexes for shelter and medical care rose, but these increases were offset by declines in an array of indexes including new vehicles, used cars and trucks, apparel, recreation, and tobacco. [Bureau of Labor Statistics, 11/17/10]

BLS explains that “core” inflation, which excludes food and energy prices, “is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy.” According to the Federal Reserve Bank of San Francisco, energy price changes have:

often resulted from factors other than an underlying trend increase in general prices ... Therefore, the changes in energy prices are not necessarily a sign of inflation and, when they are included, can distort a trend increase in general prices. By measuring core inflation, economists are attempting to isolate what is happening to general prices without distraction from spikes in volatile energy prices.

Time: Current Inflation Is “Negligible,” “As Frightening As A Feather.” In an article about Fed chairman Ben Bernanke, Time's Michael Grunwald wrote: "[I]nflation was a crippling 12.5% when Reagan took office. It was a manageable 4.4% when he left. Today it's a negligible 1.2%, as violent as a violin, as frightening as a feather, as deadly as a dachshund." Grunwald further wrote that, “so far,” inflation hawks have “been wrong”:

Right now, unemployment is a staggering 9.6%, while inflation and inflation expectations remain unusually low. Ordinarily, the obvious Fed policy response would be to step on the monetary gas by lowering interest rates, but the Fed already lowered interest rates as low as they could go in December 2008. And in order to fend off a full-fledged Depression, Bernanke continued to jam on the accelerator with an initial round of quantitative easing, buying $1.7 trillion worth of mortgage-backed securities and Treasury bonds. The action bloated the Fed's balance sheet to unheard-of proportions, and Bernanke then made it abundantly clear that he was extremely reluctant to give any additional gas and looked forward to the day the economy had recovered enough to apply the brakes.

That's because another downside to modest inflation is the possibility that it could spiral out of control. To some inflation hawks, America is always on the brink of becoming Zimbabwe or Weimar Germany, the dollar is perpetually on the edge of collapse, and Chinese investors are forever poised to abandon U.S. treasuries. So far, they've been wrong, and inflation doves like Krugman who have clamored for additional action have battered them with I-told-you-so comments. But markets are a confidence game, so there are genuine risks to inflationary policies. And it's not clear that blasting more money into the banking system will have the desired effect of stimulating loans and economic activity. The system is already quite liquid, and Bernanke has suggested that pouring in more cash could be like pushing on a string. [Time, 11/12/10]

The New York Times: “2010, A Year Of No Inflation.” In a post titled, “2010, a Year of No Inflation,” The New York Times' David Leondhardt wrote:

The lack of inflation this year is a story that deserves more attention than it has received.

On Friday, the Labor Department will release the inflation number for August. Economists are expecting an increase of about 0.2 to 0.3 percent over July's Consumer Price Index. If that's correct, it won't be nearly enough to reverse a remarkable period in which prices have barely risen at all.

Over the last two years, inflation has been zero. Over the last year, it has been just 1.3 percent. Over the last six months, it has been below zero -- negative 0.7 percent.

[...]

There is no question that inflation can be terrible. Right now, though, it sure looks like the last war. [Economix, The New York Times, 9/13/10]

Mankiw: U.S. “Has Experienced Only Benign Price Increases.” In January, Conservative economist Gregory Mankiw wrote in The New York Times:

[D]espite having the two classic ingredients for high inflation, the United States has experienced only benign price increases. Over the last year, the core Consumer Price Index, excluding food and energy, has risen by less than 2 percent. And long-term interest rates remain relatively low, suggesting that the bond market isn't terribly worried about inflation. What gives?

Part of the answer is that while we have large budget deficits and rapid money growth, one isn't causing the other. Ben S. Bernanke, the Fed chairman, has been printing money not to finance President Obama's spending but to rescue the financial system and prop up a weak economy.

Moreover, banks have been happy to hold much of that new money as excess reserves. In normal times when the Fed expands the monetary base, banks lend that money, and other money-supply measures grow in parallel. But these are not normal times. [The New York Times, 01/16/10]