As if inflation wasn’t “mysterious” enough to the Fed already, today the New York Fed joined the Atlanta Fed first in releasing its own measure to track underlying inflation called, simply, the Underlying Inflation Gauge. What is notable is that this latest inflation tracker shows prices behaving quite differently from traditional indexes this year.
According to the UIG’s August measure, broad inflation came in at a red hot 2.74%, the highest since November 2007, according to historical data from the Fed. That compares with just 1.9% annual inflation according to the Labor Department’s CPI and an even more paltry 1.4% as measured by the preferred PCE gauge of Fed policy makers, which matched the lowest since September 2016.
This is what the latest reading showed:
The UIG estimated on the ‘full data set’ increased from a revised 2.64% in July to 2.74% in August. The ‘prices-only’ measure increased from a revised 2.09% in July to 2.17% in August. The August CPI showed a further pick up in inflation from June. In response to the firming of CPI inflation, both UIG measures displayed a rise in trend inflation. he UIG measures currently estimate trend CPI inflation to be in the 2.2% to 2.7% range, with both registering above the actual twelve-month change in the CPI.
This post was published at Zero Hedge on Sep 22, 2017.