Over at the Wall Street Journal, James Mackintosh gets some surprising front-page treatment for a dovish take on inflation:
If core inflation came in just below 3%, the Federal Reserve would breathe a huge sigh of relief....It isn’t merely a dream: Measure U.S. price changes the way Europe does, and inflation was already there in May.
....U.S. core inflation—which excludes volatile food and energy—measured using the standard consumer-price index was 2.3 percentage points higher than the European-style inflation, known as the harmonized index of consumer prices. It is the biggest gap there has ever been.
It's actually much more dramatic than that. Mackintosh is using conventional year-over-year figures, which aren't very useful when inflation is changing quickly—as it is now. If, instead, you measure monthly inflation to get a better sense of where things are right now, then core HICP is an astonishing 5.1% lower than core CPI:
Why is US inflation so much lower if you calculate it the European way?
The main reason is that Europe’s measure, known as HICP, doesn’t include the imaginary cost of what a homeowner would pay to rent their house....Exclude something that no one actually pays, and which is calculated from guesses by homeowners of the rental value of their house, and core inflation’s looking basically fine.
The BLS will have new inflation figures for us Wednesday morning, although I don't know how quickly their HICP estimate gets updated. Stay tuned.
Exogenous inflation ---> ZLB
Are you ready to believe?
Its not as if the Fed doesnt have access to this information. They know this.
We should take the Fed at its word when it says that wage increases are the real problem.