The Consumer Price Index (CPI) was above consensus on both the headline and core fronts.Instantaneous inflation (per Eckhout(2023)) rose slightly.
figure 1: Year-on-year CPI inflation (blue), core CPI inflation (pink), super core CPI inflation (green), %, decimal form. NBER-defined recession peak-to-trough dates appear gray. The red dotted line implies that the CPI inflation rate is consistent with the 2% PCE inflation rate. Source: BLS, NBER, and author's calculations.
The super core CPI includes all items excluding food, housing, energy and used cars and trucks.
While the year-over-year inflation rate is conventional, it adds weight to the distant past, making it sensitive to the inclusion or exclusion of the first-month Consumer Price Index (CPI).For an alternative indicator that shows some trend, I use the following method to show instantaneous inflation for the same category EikehoutThe formula (T=12, a=4).
figure 2: Instantaneous CPI inflation (blue), core CPI inflation (pink), super core CPI inflation (green), %, decimal form, each Eikehout (T=12, a=4). NBER-defined recession peak-to-trough dates appear gray. The red dotted line implies that the CPI inflation rate is consistent with the 2% PCE inflation rate. Source: BLS, NBER, and author's calculations.
Note that in terms of overall CPI inflation, we are close to the Fed's target; the same is true for the super core.
Part of the surprise was due to owner-equivalent rents, suggesting that upward inflationary pressures may be more persistent given the rebound in home prices.
