Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US Inflation Data: No Fuel for Inflation F...
Headline CPI Inflation Slows Again in September <ul><li>Although some observers think the Fed’s easy monetary policy risks...
Core Inflation Falls to Lowest Rate of the Year <ul><li>Food and energy prices are highly volatile and account for much of...
“ Trimmed Mean” CPI also Slows <ul><li>Another way to remove volatility from the CPI series is the  16% trimmed mean CPI  ...
Which Measure is Best? <ul><li>The CPI for all items gives the most accurate picture of current changes in the cost of liv...
The Longer Term Trend <ul><li>To see longer term trends in inflation, it is useful to look at year-on year changes, which ...
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US Inflation Data: Scant Fuel for Inflation Fears in September CPI Report

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Although some still fear inflation, there was little sign of it in the September CPI report and related core inflation measures

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US Inflation Data: Scant Fuel for Inflation Fears in September CPI Report

  1. Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US Inflation Data: No Fuel for Inflation Fears in September Report Posted Oct 22, 2011 Terms of Use: These slides are made available under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics , from BVT Publishers.
  2. Headline CPI Inflation Slows Again in September <ul><li>Although some observers think the Fed’s easy monetary policy risks a rise in inflation, there was scant fuel for their fears in the September inflation report </li></ul><ul><li>The US all-items CPI rose at a seasonally adjusted annual rate of 3.7% in September, 2011, down almost a point from the August rate of 4.6% </li></ul><ul><li>Gasoline and food prices, as well as medical services, contributed to inflation in August, as in the previous month. </li></ul>Posted October 22, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  3. Core Inflation Falls to Lowest Rate of the Year <ul><li>Food and energy prices are highly volatile and account for much of the month-to-month variation in the CPI </li></ul><ul><li>Their effect can be removed by taking food and energy out of the CPI </li></ul><ul><li>The result is called the core inflation rate, which fell to just 0.6% in September (monthly change stated as annual rate), the slowest for the year </li></ul><ul><li>Because food and energy prices contributed more than their share to inflation, as they have for most of the year, the core inflation rate was below the all-items rate </li></ul>Posted October 22, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  4. “ Trimmed Mean” CPI also Slows <ul><li>Another way to remove volatility from the CPI series is the 16% trimmed mean CPI published by the Federal Reserve Bank of Cleveland </li></ul><ul><li>The trimmed mean CPI removes the 8% of prices that increase most and the 8% that increase least in each month, whether they are food, energy, or something else </li></ul><ul><li>In July, the trimmed mean inflation slowed significantly, although it remained above the core inflation rate </li></ul>Posted October 22, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  5. Which Measure is Best? <ul><li>The CPI for all items gives the most accurate picture of current changes in the cost of living for urban consumers </li></ul><ul><li>The core CPI and trimmed mean CPI give more accurate pictures of underlying trends </li></ul><ul><li>Economists at the Fed look closely at the core and trimmed mean CPIs to judge the effect of monetary policy </li></ul><ul><li>In contrast, the all-items CPI includes food and energy prices that are set on world markets, beyond direct control of monetary policy </li></ul>Posted October 22, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  6. The Longer Term Trend <ul><li>To see longer term trends in inflation, it is useful to look at year-on year changes, which compare each month’s price level with that of the same month in the previous year </li></ul><ul><li>All measures of inflation rates slowed during the global recession, but they are now rising again </li></ul><ul><li>The Fed considers 2% annual inflation to be consistent with prudent monetary policy in the long run </li></ul>Posted October 22, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
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