Activity 2-unit 2-update 2024. English translation
US CPI Data: Core Inflation Trend Flat, Headline CPI Falls in March
1. Data for the Classroom from
Ed Dolan’s Econ Blog
http://dolanecon.blogspot.com/
US CPI Data: Core Inflation
Trend Flat, Headline
Inflation Falls in March
Posted April 13, 2012
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2. Headline CPI Inflation Slow Slightly in March
The US all-items CPI showed a
moderate increase in March, but
slowing growth of gasoline prices
allowed the headline inflation rate to
drop back a bit from February
The March headline inflation rate from
the Bureau of Labor Statistics, stated
as an annual rate, was 3.54%, down
from 5.03% in February
In addition to energy, prices of used
vehicles, apparel, and medical
commodities pushed the CPI higher
Posted April 13, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
3. Core Inflation Shows Little Trend in Recent Months
Food and energy prices are highly
volatile and usually account for much
of the month-to-month variation in the
CPI
Their effect can be removed by taking
food and energy out of the CPI. The
result is called the core inflation rate.
The recent uptick in inflation has
largely been confined to the energy
sector. As yet there is little spillover
into general inflation as measured by
the core CPI
Posted April 13, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
4. Trimmed Mean Inflation Is Closely Tracking Core Inflation
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
So far in 2012, the trimmed mean
CPI has closely tracked the core
CPI, but that has not always been
the case
Posted April 13, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
5. Which Measure is Best?
The CPI for all items gives the most
accurate picture of current changes
in the cost of living
Economists at the Fed look closely
at the core and trimmed mean CPIs
to judge the effect of monetary policy
on underlying inflationary trends
The Fed considers inflation of about
2 percent to be consistent with
prudent monetary policy
All three measures of inflation were
moved slightly above the Fed’s 2%
target in January
Posted April 13, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
6. The Longer Term Trend
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 year before
All y-o-y measures of inflation rates
slowed during the global
recession, then rose again for most
of 2011.
The three measures shown here
have been converging in recent
months as inflation becomes less
volatile
Posted April 13, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com