R. W. Hafer explains that the recent decline in inflation is the result of declining relative prices of energy and food and a concomitant drop in the trend rate of transactions money growth. Hafer notes that inflation, a persistent rise in the general level of prices, is related directly to the average long-run rate of money growth. He points out, however, that random shocks affecting individual prices (which are unrelated to money growth) cause the observed inflation rate to temporarily rise above or fall below the underlying, monetary-induced inflation rate. Hafer demonstrates that, after accounting for the effects of food and energy prices, which have risen more slowly than the rest of the prices making up the consumer price index (CPI), the inflation rate thus far in 1984 is running close to 5 percent. The actual rate of inflation, however, is below that predicted by monetarist models that rely on past growth of M1, even after taking account of the effects of slower relative food and energy price increases. This problem, Hafer suggests, may be due to the fact that, since 1981, the definition of M1 has been altered with the inclusion of several interest-bearing components that have significant savings type characteristics. Using an alternative transactions money measure that weighs each of its components according to its use in transactions, Hafer finds that the recent divergence between inflation and trend money growth is reduced significantly.