Investing.com - Financial Markets Worldwide
Get 40% Off
Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Five Different Measures Of US Inflation

ByMarc Chandler
Published 05/23/2013, 04:26 AM
Updated 07/09/2023, 06:31 AM

This Great Graphic was posted on FT Alphaville and it comes from Credit Suisse. It shows different measures of inflation. The Fed's preferred measure is the core PCE (deflator). However, it is sensitive to other measures as well.

Perhaps it is like the different measures of unemployment. There is no true or right measure of unemployment. There are different measures and each has a different use. It turns out that the commonly used U3 measure follows the guidelines established by the International Labor Organization and allows for more meaningful international comparisons.

inflation
Fed officials have largely played down the drift lower in prices. Bernanke himself suggested that he was not worried as inflation expectations remain anchored near 2%. This is perhaps one of the benefits of QE--namely helping to underpin inflation expectations that is among the least commented consequence.

The Fed may be right to play down the decline in the measured inflation, though a couple more soft reports could make it become more salient. Given the monthly increases seen in Q2 12, it is possible that as these drop out of the year-over-year comparisons, core PCE still drifts lower. However, the second half will be a different story. In the second half of last year, core PCE rose by a cumulative 0.3%. Core PCE rose 1.1% on a year-over-year basis through March, the most recent data, but in Q1, the annualized pace was 1.6%.

Bernanke and the majority of the Federal Reserve say that a few more months of data is before deciding if it should taper of the long-term asset purchases. Because the economy did not enter a self-sustaining growth phase, it can be judged that QE1 and QE2 ended prematurely. Bernanke and Co don't want to make the same mistake a third time.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Latest comments

Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.