December 2022 CPI | Econbrowser

Below are the headline and core CPI levels, against forecasts and nowcasts.

Figure 1: CPI level, 1982-84 = 100 (black), Cleveland Fed real-time forecast as of 1/11/2023 (pink box), high and low forecast (grey +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author accounts.

Figure 2: Core CPI level, 1982-84 = 100 (black), Cleveland Fed real-time forecast as of 1/11/2023 (pink box), high and low forecast (grey +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author accounts.

What does this mean for core inflation? In Figure 3 I plot the actual and implied inflation rates.

Figure 3: CPI quarterly core inflation rate, annualized (black), Cleveland Fed forecasts as of 1/11/2023 (pink box), high and low forecasts (grey +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author accounts.

Actual core inflation on a quarterly basis was lower than the Cleveland Fed forecast. In Figure 4, I present CPI core inflation versus PCE q/q.

Figure 4: Quarterly core CPI inflation (blue), chained core CPI inflation (brown), and core PCE deflator inflation (black), all in decimal form (i.e. 0.05 means 5%). Seasonally adjusted series CPI using X13 census (brown). Specific recession dates NBER (peak to trough) are shaded in grey. Source: BLS, BEA, NBER and author accounts.

This development seems to support the idea of ​​a shift in the inflationary regime (see this post). Although CPI inflation has risen monthly, the Cleveland Fed’s forecast for core personal consumption expenditures in December has changed little in response to the CPI release, now standing at 0.32 points for the month.

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