How Inflation Lowers Inflation

As new money is created by the banking system, it enters the price system as the recipients spend it. As the prices of some goods rise, this should be captured in the CPI, right?

Not necesssarily. New money does not impact all prices uniformly. And the CPI does not include all prices, only consumer goods prices, and even then unevenly. If the effect of the new money is mainly felt through financial assets or those consumption goods not included in the CPI, then the CPI will not reflect impact of the new money on prices...more>>