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Newsletter
The Rise (and Fall) of Inflation During the Early 2020s
Inflation has been on many people’s minds. There are several measures of inflation available, and each one plays a role in providing a more complete understanding of inflation’s causes and effects. This Page One Economics® Econ Primer describes key measures of inflation, including the consumer price index, and how the Federal Open Market Committee pays particular attention to these measures as it makes policy decisions—adjusting its policy stance when necessary to move the economy toward maximum employment and price stability.
Using Core Inflation to Predict Headline Inflation
An analysis of CPI data suggests that a measure of inflation excluding food and energy and a measure excluding only energy are useful predictors of overall inflation 12 months in the future.
Measuring Inflation: Headline, Core and “Supercore” Services
Inflation measures like CPI and PCEPI and their variations of headline, core and supercore differ in the prices they cover and in the weighting of price categories.
What Do Components of Key Inflation Measures Say about Future Inflation?
A new analysis suggests that the food expenditures category of the consumer price index could be a useful signal of future headline inflation.
Not all price increases are equal; pandemic-era outliers drove inflation spike
Many individual price changes make up widely used gauges of inflation. Their relative importance changes over time and may affect how consumers perceive inflation. Such perceptions can prompt households to update their inflation expectations, decreasing optimism about real economic activity.
Newsletter
Adjusting for Inflation
As inflation raises the overall price level in an economy, the purchasing power of the dollar decreases and both borrowing and lending costs increase. The January 2023 issue of Page One Economics discusses how price indexes can be used to transform nominal wages and interest rates into real, or inflation-adjusted, values.
Beyond the Mean: Exploring Tail Risks in Inflation Expectations
An analysis of inflation expectations suggests that financial market participants see a 50% probability that CPI inflation could be higher than 2.5% over the next five years.
“Bought on Behalf” vs. “Purchased by”: What Counts for Inflation?
Goods and services bought on behalf of consumers, such as health care, are weighted differently in the consumer price index and the personal consumption expenditures price index.