Thursday, March 17, 2011

Cleveland Fed Median CPI Inflation Only 1%

According to the Cleveland Fed's report today, its median CPI measure of prices increased by 1.0% at an annual rate in February over the same month last year (see chart above).  In contrast, the regular CPI increased by 2.1% over the last year (February 2010 to February 2011), according to the BLS report this morning

Historically, the median CPI has been 50% more accurate at gauging future inflation than the traditional CPI (based on the Cleveland Fed's research), and the median CPI from the Cleveland Fed is not yet showing any strong signs of inflationary pressures.  The most recent 12-month inflation rate of 1.0% based on the median CPI is still way below the 3.05% average inflation rate for that series going back to 1984. 

7 Comments:

At 3/17/2011 11:01 PM, Blogger Benjamin said...

Sheesh, whether we like it or not, we need a long round of moderate inflation. We need to pay down debt, and this country lacks the resolve to do so.

Ergo, we have to inflate our way out.

Too much debt is a bad thing. Too much leverage makes for a house-of-cards type economy.

 
At 3/18/2011 6:28 AM, Blogger geoih said...

Quote from Benjamin: "Sheesh, whether we like it or not, we need a long round of moderate inflation. We need to pay down debt, and this country lacks the resolve to do so."

That's a wonderful plan. You can't stop eating, so you advocate a plan to keep right on eating, but to eat food that has no nutritional value at all and to also eat large quantities of poison, all in the hope that you will loose weight.

I think most people would recognise that this is a plan that will only kill the person who tries it. The same will happen to the government and the economy that tries it.

 
At 3/18/2011 8:16 AM, Blogger morganovich said...

what did cleveland use as a truth standard in it's study?

if you are going to claim "better future predictive value" you need to state "relative to X" as a truth standard.

using a heavily modified standard like CPI for such a calculation proves nothing if the CPI itself is incorrect. it just demonstrates that you can predict the performance of one algorithm with another.

also:

you cannot take average readings on CPI across the methodology change in 1992. whichever method you believe to be accurate, you cannot take an average of the separate series and expect it to be any more meaningful than the average of a 10 years of Fahrenheit data averaged with 20 years of celsius.

 
At 3/18/2011 9:38 AM, Blogger RWElrod2 said...

This comment has been removed by the author.

 
At 3/18/2011 9:39 AM, Blogger Bill said...

This is a total fraud.

 
At 3/18/2011 9:39 AM, Blogger RWElrod2 said...

This comment has been removed by the author.

 
At 3/18/2011 12:12 PM, Blogger Benjamin said...

Geoih-

Okay, you tell me when the US Congress will balance the federal budget.

Waiting. Still waiting...waiting some more.

The Tea Party will not do it. They represent states and districts that enjoy huge infusions of federal cash, such as the state of Kentucky. It would be economic suicide for Kentucky to go cold turkey. That state, along with the Dakotas, Montana, Iowa and several other states, would begin depopulating.

On the other hands, if we can get the budget down to just a few hundred billion in the red, and run 4 percent inflation, the national debt as percent of GDP will shrink.

We ran 3-5 percent inflation all through the mid-1980s and 1990s. We boomed. It worked.

 

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