Below is a chart depicting the magnitude of the surprise relative to the Bloomberg consensus and the Cleveland Fed's immediate forecast.
figure 1: CPI (black), Bloomberg Consensus (tan squares), Cleveland Federal Live Forecast (sky blue inverted triangle), all on a logarithmic scale. Source: BLS via FRED, Bloomberg, Federal Reserve Bank of Clevelandand the author's calculations.
figure 2: Core CPI (black), Bloomberg Consensus (tan squares), Cleveland Federal Live Forecast (sky blue inverted triangle), all on a logarithmic scale. Source: BLS via FRED, Bloomberg, Federal Reserve Bank of Clevelandand the author's calculations.
This is what a “trend” inflation indicator looks like, specifically instantaneous inflation (T=12, a=4) Eckhout(2023).
image 3: Instantaneous CPI inflation (bold black), instantaneous core CPI inflation (sky blue), annualized annualized inflation monthly average (red), annualized monthly inflation median (pink) and annualized super core CPI monthly rate monthly (green).The instantaneous inflation rate is calculated as Eckhout(2023), for T=12, a=4. Source: BLS, Federal Reserve Bank of Dallas via FRED, Bureau of Labor Statisticsand the author's calculations.
Recall that the Fed doesn't explicitly target the CPI, but the PCE deflator (the title is based on the text, but in reality everyone seems to use the core). But obviously the CPI information is related to the PCE deflator. The Cleveland Fed Live Forecast Utility shows the impact of the PCE deflator live forecast.
source: Federal Reserve Bank of Clevelandviewed on April 10, 2024.
While year-over-year core PCE inflation will fall in line with the pre- and post-CPI forecasts, month-on-month core PCE inflation will now rise rather than stabilize.
Figure 4: Core PCE quarterly inflation (bold black), current forecasts as of 3/10 (sky blue inverted triangles) and data as of 3/9 (light green squares), all expressed as percentages. Source: Bank of East Asia, Federal Reserve Bank of Clevelandand the author's calculations.
Modal predictions come from continuing medical education Expectations for the June 12 meeting fell by 25 basis points (56%); after the CPI release, this number was unchanged (81%). The expected value before the release was 5.23%, and the expected value after the release was 5.33%.
CEA’s view is that here.
