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A different measure of inflation tells us it’s over

Published on 14 Comments on A different measure of inflation tells us it’s over

Apparently the Fed has grown a little skeptical of inflation indexes that rely partly on "imputed" measures of things like rent. Instead, they're starting to look at pure market-based indexes:

This is a 3-month rolling average, partly just to smooth things out and partly because it's my favored measure. In November, the plain old monthly number stood at 1.6%. Core market-based PCE was at 1.4%.

On a year-over year basis, market-based PCE was 2.0% in November. Core market-based PCE was at 2.4%.

If this is truly a better way of measuring underlying inflation, it's yet more evidence that inflation is well and truly over.

14 thoughts on “A different measure of inflation tells us it’s over”

  1. jte21

    This is indeed good news. The bad news is that nobody gives a shit. All that matters is whether eggs and gas still *feel* expensive. So until eggs are 50 cents a dozen and gas $2.00 a gallon, we have to live under (stupid) fascism for the foreseeable future.

    1. SwamiRedux

      So until eggs are 50 cents a dozen and gas $2.00 a gallon, we have to live under (stupid) fascism for the foreseeable future.

      That's right. Make America Great Again!
      Bring prices down! (except for my property values. or my stock portfolio)

    2. lawnorder

      Speaking from the old guy perspective of a person who lived through the inflation of the '70s and '80s, people quickly get used to higher prices once they stop going up. With inflation at a low level, current price levels will become the new normal well before the '26 mid-terms.

  2. Art Eclectic

    Inflation may be over but prices are still not back down to 2018 levels, so it doesn't matter.

    Housing still massively overpriced, new cars still overpriced, HVAC equipment still overpriced.

  3. D_Ohrk_E1

    Is that real PCE?

    There's barely any difference between PCE and market-based PCE, and there's some divergence between core PCE and core market-based PCE, but the divergence is wide between core PCE less housing and core market-based PCE less housing,

  5. emjayay

    Looked it up:

    The "core" PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

  8. akapneogy

    Meanwhile, long term interest rates are creeping up even while the Fed is easing short term rates. Krugman wonders if bond vigilantes are demanding an "insanity premium" at the prospect of Trump's declared policies. Brad deLong doesn't think that it is “bond vigilantes cleaning their weapons at the prospect of the reïnstallation of the Chaos-Monkey-in-Chief”

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