According to work Paper by Jan Eeckhout (UPF Barcelona), here is the PCE inflation rate as of December:
figure 1: YoY PCE inflation (blue), MoM (sky blue), MoM (black circles) and instantaneous inflation (a=4) (bold red), all annualized. Recession dates as defined by the NBER peak-to-valley are shaded in gray. The dashed red line at 2%. Source: BEA and authors’ calculations.
Note that the instantaneous rate (a=4, tau=12) tracks the Q/Q inflation rate very well.
The instantaneous rate of inflation adds to recent observations. How does this compare to alternative measures that try to track trends?
figure 2: Transient PCE inflation (a=4, tau=12) (bold red), Q/Q inflation (tan), average M/M inflation of 16% (sky blue), and core M/M (purple), all annualized. Recession dates as defined by the NBER peak-to-valley are shaded in gray. Source: BEA and authors’ calculations.
Interestingly, neither the core m/m nor the pruned average m/m track instantaneous inflation well (a=4, tau=12); different values of a may lead to different results (a=infinity is The full weight of the most recent observation, a=0 is the same weight for all tau observations, a=1 is a linearly decreasing weight).
as i was Friday market watch.
