Why can’t the US get inflation to 2%? Consider the ‘Amazon effect’
As online retailers gain market share, they put pressure on brick-and-mortar shops to keep prices down, and this might be preventing inflation from getting back to normal
For all its efforts, the Federal Reserve cannot seem to get inflation up to its 2% target — a situation that chair Janet Yellen has called a "mystery". If she’s looking for clues, she might want to ask Amazon.com founder Jeff Bezos. Increasingly, economists are talking about the "Amazon effect". The idea is that as online retailers gain market share, they’re putting pressure on brick-and-mortar shops to keep prices down. This, in turn, might be preventing inflation from getting back up to normal. The latest US inflation data offer some support for this idea. As of September, the price index for commodities excluding food and energy — a category including apparel, electronic goods and lots of other things that online retailers sell — was down 1% from a year earlier. The decline shaved about 0.25 of a percentage point off the broader "core" inflation rate, which clocked in at just 1.7%.
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