The high year-over-year inflation rate masks progress in the past five months

Inflation is almost back down to the Federal Reserve’s 2% target. Even more astonishing, hardly anyone seems to have noticed.

Whether measured by the consumer-price index, or CPI, which most people watch, or the price index for personal consumption expenditures, or PCE, which the Federal Reserve prefers, the annualized inflation rate has been around 2.5% over these five months.

Yet hardly anyone has noticed this stunning development because of the near-universal concentration on price changes measured over 12-month periods, which are still 7.1% for CPI inflation and 5.5% for PCE inflation.

Alan S. Blinder WSJ 5 January 2023

Mr. Blinder, a professor of economics and public affairs at Princeton, served as vice chairman of the Federal Reserve, 1994-96. He is the author, most recently, of “A Monetary and Fiscal History of the United States, 1961-2021” (Princeton University Press).


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