That year-over-year comparison could look ugly, and the Fed doesn’t want the markets to overreact. The 12-month comparison will go back to the “low” inflation period a year ago, which had caused so much hand-wringing at the time. In the minutes of the Fed’s meeting on March 20-21, released this afternoon, the Fed already warns of a higher 12-month PCE inflation in the March data, as if to prepare the markets not to get spooked. So with this CPI release, the Fed is getting more data to support faster rate increases. But its target of 2% is based on the core PCE inflation index, which runs roughly in parallel but usually lower than CPI. The Fed looks at a broad range of inflation data. Medical care services rose 2.1%, with hospital services jumping 5.2%! It is comprised mostly of various housing costs, including rent and owners’ equivalent of rent, both of which rose 3.3% year-over-year. The sub-index for “services less energy” – the biggie, with a relative importance of 59% of CPI – rose 2.9% over the past 12 months. But even core CPI in March rose 2.1% from a year ago, the sharpest increase since February 2017: So these prices are eliminated to get a view of “core” inflation. When the all-items CPI surges, it’s usually blamed on food and energy prices, which are volatile. This was the sharpest increase in prices since March 2017:Įnergy was up 7% from a year ago, with gasoline up 11%, which people have started to notice at the pump.
The report by the NY Fed summarizes: “The UIG measures currently estimate trend CPI inflation to be approximately in the 2.2% to 3.2% range.”īy comparison, the Consumer Price Index for “all items,” released today by the Bureau of Labor Statistics, rose 2.4% in March compared to March last year (not seasonally adjusted). In March, the “prices-only” UIG rose 2.23% from a year ago, and the “full data set” UIG rose 3.14%. This chart shows the “full-data set” UIG:
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The “full data set” UIG incorporates all the data of the “prices-only” UIG plus 103 macroeconomic and financial variables. This is comparable to a “core” inflation measure.
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The “prices-only” UIG is based on 242 disaggregated price series of the CPI and the Producer Price Index (PPI), import and export prices, and the Dallas Fed’s “Trimmed-Mean 12-month PCE” inflation. The New York Fed’s Underlying Inflation Gauge (UIG), an index that was first released in September 2017 based on data going back to 1995, comes in two forms that take a broader look at inflation than any of the other indices ( detailed list): But they all show nationwide if watered-down trends. No inflation gauge does justice to that particular reality. Every household has its own inflation rate, which varies with what their lives look like: medical expenses, kids in college, renting in a city where rents are soaring, etc.
This includes the New York Fed’s “Underlying Inflation Gauge,” which hit the highest level since July 2006.Ĭonsumer price inflation is in the eye of the beholder. “Underlying Inflation” hottest since July 2006.Īfter the Bureau of Labor Statistics released its Consumer Price Index for March this morning, including a hotter-than-expected (or feared) reading for the core Consumer Price Index – more on that in a moment – several other inflation gauges were released, all based on various ways of analyzing the data pile of the BLS.
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