The Fed's preferred inflation gauges are deflators of Personal Consumption Expenditures (PCE), the consumer spending component of GDP. These price indices are based on a few input data sources, including the Consumer Price Indices (CPI),Producer Price Indices (PPI), and Import Price Index (IPI), but are methodologically distinct from them. We usually have a decent read of PCE deflators after CPI (which tends to be the first inflation gauge released), but there are a lot of controls and calculations to account for. When updating views month to month about inflation, the dirty work here matters.
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Jun 13, 2022
Summary Although neither the magnitude nor composition of last week's inflation print surprised us, especially given the knock-on effects from the 'Ukraine shock', they did surprise the CPI forecasting consensus. In response, Chair Powell and the rest of the committee will likely deliver two innovations: 1.
Jun 09, 2022
While it is true that base effects should create more favorable terrain for year-over-year headline CPI inflation readings to decline in this calendar year, the full implications of the current commodity supply shocks stemming from the Ukraine invasion still remain underrated. It is plausible that we return or even surpass
May 10, 2022
Summary: 1. Headline CPI inflation is more likely to punch above expectations (0.2%) for three reasons: (A) gasoline and diesel prices have outperformed crude oil, (B) spot natural gas prices have generally continued to climb and will likely pressure both electricity prices and utility gas service prices, and (C)
Journalists can pretty much pre-write their headlines given the spike in oil prices. Year-over-year headline inflation readings are set to make new highs, potentially breaching 8% based on the food and energy impulse from what we might call the "Putin shock" to key commodities. At the same time,
It is key for commentators and policymakers to bear in mind that "transitory vs. persistent" is not the same debate as "narrow vs. broad-based."
The policy mistake worth worrying about isn’t the speed of taper per se; it's the signal that taper sends about the timing of liftoff in interest rate policy.
As the year ends, the final three inflation prints are more likely to be on the hotter side of what policymakers are comfortable with, especially due to developments in motor vehicle and air travel prices.