Below are the headline and core CPI levels, compared to forecasts and nowcasts.
figure 1: CPI levels, 1982-84=100 (black), Cleveland Fed nowcast as of Jan 11, 2023 (pink squares), high and low forecasts (gray +). Source: BLS via FRED, cleveland fed, Bloomberg (1/11/23)the author’s calculation.
figure 2: Core CPI levels, 1982-84=100 (black), Cleveland Fed’s latest forecast as of January 11, 2023 (pink squares), high and low forecasts (gray +). Source: BLS via FRED, cleveland fed, Bloomberg (1/11/23)the author’s calculation.
What does this mean for core inflation? In Figure 3, I plot actual and implied inflation rates.
image 3: Quarter-over-quarter core CPI inflation, annualized (black), Cleveland Fed’s immediate forecast through January 11, 2023 (pink squares), high and low forecasts (gray +). Source: BLS via FRED, cleveland fed, Bloomberg (1/11/23)the author’s calculation.
Actual q/q core inflation is below the Cleveland Fed’s recent forecast. In Figure 4, I show CPI versus PCE q/q core inflation.
Figure 4: Core CPI MoM inflation (blue), MoM core CPI (brown), PCE core deflator inflation (black), all in decimal form (ie 0.05 means 5%). Chained CPI seasonally adjusted using Geometric Census X13 (brown). Recession dates (peaks and valleys) shaded of gray as defined by NBER. Sources: BLS, BEA, NBER and authors’ calculations.
This development seems to support the idea of ​​a shift in the inflationary regime (see this postal). Despite rising MoM CPI inflation,e Cleveland Fed December core PCE nowcast Reaction to the CPI release was little changed, now at 0.32 ppts m/m.
