Tighter Monetary Policy is Now Slowing the Underlying Cyclical Components of Inflation
Another numbers tour de force.
Great visualizations! Especially the decomposition above trend. It shows how real marginal cost has remained elevated since the pandemic and even the goods sector that many have thought has normalized, appears to still have significant issues. Only until real marginal cost drops will we see an elevated inflation rate.
Hey, a question on core and supercore, and this: "core services ex-housing price increases that the Fed views as critical to underlying inflation"
IOW, the Fed thinks those smaller inflation-data subsets, ignoring big chunks of the data, are more predictive of future inflation than, say, headline inflation trends over whatever period. (For whatever theoretical reasons — stickiness, expectations, etc.)
Do you know if there's any decent empirical evidence supporting that theoretical assumption? Has supercore been a good inflation predictor (versus others), historically?
Thank you for preparing and sharing this expert analysis. I appreciate reading your analysis after an inflation print. I hope if I keep at it, I will learn to interpret the prints with a more-expert eye.
Real-time measures of declining rent growth over the past year, and that this decline seems reflected in CPI measures for the last few months (as previously prophesied on these pages), seem particularly promising. Are there reasons not to expect this reflection in the CPI to continue in the months ahead, or for rent-growth measures not to return to pre-pandemic levels around the end of this year? Given that housing is about 33% of CPI and 16% of PCEPI , this would seem to significantly alleviate inflation measures moving forward.
Some folks have compared this inflation to the 1970's and I wonder if there is the potential to break down those data too, to see how (dis)similar then and now really are. Your vizzes are very good and I would love to see how you would incorporate 1970's into your 21st century data.
Terrific review of where we were and where we are relative to inflation Joseph. Thanks for the in-depth review. Ophir Gottlieb is a big fan of yours as well.