Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US Inflation Data: Headline CPI Falls in O...
Headline CPI Falls in October <ul><li>The US all-items CPI fell in October at a seasonally adjusted annual rate of 1% </li...
Core Inflation Little Changed <ul><li>Food and energy prices are highly volatile and account for much of the month-to-mont...
Trimmed Mean Inflation Slows <ul><li>Another way to remove volatility is the  16% trimmed mean CPI  published by the Feder...
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 Slows in October Giving Fed Room to Maneuver

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The US headline consumer price index fell in October. Core inflation also slowed. Low inflation gives the Fed more room to maneuver

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US Inflation Slows in October Giving Fed Room to Maneuver

  1. Data for the Classroom from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US Inflation Data: Headline CPI Falls in October, Core Inflation Stays Low Posted November 16, 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 Falls in October <ul><li>The US all-items CPI fell in October at a seasonally adjusted annual rate of 1% </li></ul><ul><li>The October decrease was consistent with a downward trend since headline CPI inflation peaked at over 6% in July </li></ul><ul><li>Falling prices for gasoline and other forms of energy were the biggest factor pulling the index downward. New and used vehicle prices also fell </li></ul>Posted November 16, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  3. Core Inflation Little Changed <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 remained at a low 1.7% in October (monthly change stated as annual rate) </li></ul><ul><li>Prices for apparel and for medical goods and services rose slightly faster than in September, nudging the core CPI inflation rate slightly upward </li></ul>Posted November 16, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
  4. Trimmed Mean Inflation Slows <ul><li>Another way to remove volatility is the 16% trimmed mean CPI published by the Federal Reserve Bank of Cleveland. It removes the 8% of prices that increase most and the 8% that increase least in each month, whatever they are </li></ul><ul><li>Trimmed mean inflation slowed to a 1.4% annual rate in October </li></ul><ul><li>It was the first month this year that all three inflation indicators fell below the 2% annual rate that the Fed considers to be consistent with prudent monetary policy </li></ul>Posted November 16, 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 November 16, 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. They have risen for most of 2011, but are now beginning to level off </li></ul>Posted November 16, 2011 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

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