Base effect
The influence of the prior comparison level on a year-over-year growth rate.
Plain languagePractical exampleConnected reading
01
What is it?
The influence of the prior comparison level on a year-over-year growth rate.
02
Why does it matter?
It is essential for interpreting acceleration or slowdown in inflation and growth.
03
How should it be read?
Read the annual rate with monthly change, index level and the prior-year month.
04
Common mistake
Treating it alone as proof that prices actually fell or rose.
A simple example
Annual inflation can fall when an unusually large prior-year monthly increase drops out.