I don't remember: have I posted this chart before? I guess it can't hurt to post it again:
There are technical differences between the CPI and PCE measures of inflation, but they mostly only show up over long stretches of time. Over short periods, as you can see, they're generally quite close.
Except during the recent inflation spike. Did we really hit a high of 9%, as CPI suggests, or only 7%, as PCE suggests? Or did we actually top out at 10%, as the European HICP says? I don't know, but it's an intriguing mystery.
In any case, CPI and PCE are now back together and both say inflation has risen about 3.5% over the past year and 3% over the past six months. That's pretty close to the Fed's 2% target. Core PCE is already there, increasing at an annualized rate of 2.16% over the past three months.
I just got my auto insurance renewal rate, and it went up 43% since last year. The coverage is the same and I had no claims. I know everyone's costs have gone up but given that overall inflation was running around 3%, I can't see any explanation for this. It's a mutual insurance company, so "corporate greed" doesn't make sense. I bet a lot of people are seeing similar price increases in various parts of their lives and it worries me that Biden will get blamed.
Corporate greed can show up in mutual companies when the executives believe they are entitled to be treated as owners. Also, traffic accidents are up, severity of traffic accidents is up. It's likely that your insurance company didn't raise rates since 20 19, so there is a lot of catching up to do. And there is still a supply chain problem for auto parts that has increased the cost of repairs.
I can imagine many reasons for auto insurance in particular. First, the companies are getting killed by the Kia thefts. Second, used car prices went up far faster, and that increases the payouts. Third, I wish I had a number 3 offhand.
Read: https://economics.td.com/us-cpi-pce
There is no mystery about this. The two measures weight things differently and the CPI has usually been higher than the PCE, especially at peaks:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1ajFs
They both tell you when inflation is high and when it is low. Both are arbitrary - there is no "correct" measure. People who don't like Social Security prefer the PCE because it would give a lower inflation correction to the benefits. The Fed may prefer it because the lower values make their failure to control inflation look quite not as bad.
" inflation has risen about 3.5% over the past year and 3% over the past six months. That's pretty close to the Fed's 2% target"
Yeah, pretty close.
"Inflation has risen about 3.5% over the past year and 3% over the past six months."
Et tu, Kevin? *Prices* [by whatever index you are using] have risen about 3.5% over the past year, or else inflation has *been* about 3.5% over the past year. Otherwise, how can you keep arguing (correctly!) that inflation has been coming down?
Sorry, but as a Math Guy, I'm not just being pedantic here: blurring this distinction tends to make a mess of public understanding of what's really going on, to the detriment of good policy debate.
Thank you! The difference between a level or quantity, and a rate of change in that level/quantity, is widely misunderstood. You are absolutely correct in pointing out this contribution to the confusion.