Various measures of CPI inflation remained near or below the 2 percent inflation target during September

1. Data for your Classroom from
Ed Dolan’s Econ Blog
Delayed Data Show September
Was a Quiet Month for Inflation
Nov. 2, 2013
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2. Consumer Price Inflation Rises Slightly in September
 The seasonally adjusted all-items
U.S. consumer price index rose at a
seasonally adjusted 2.18% annual
rate in September. The data was
released late due to the government
shutdown
 Almost all of the variability in the CPI
since the start of the year has come
from energy prices, especially the
price of gasoline. Energy prices
have a weight of 9.5% in the CPI
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

3. Core Inflation Remains Below 2 Percent
 Food and energy prices are volatile
and usually account for much of the
month-to-month change 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 annualized core inflation rate for
September was just 1.45 percent
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

4. Trimmed Mean Inflation Rises Slightly
 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 (or decrease most), whatever
they are
 The 16 percent trimmed mean CPI
rose at a 2.21 percent annual rate in
September, up slightly from August
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

5. Which Measure is Best?
 The CPI for all items gives the most
accurate measure of current
changes in the cost of living
 Economists at the Fed look closely
at the core and trimmed mean CPIs,
and at other inflation indicators
derived from the GDP accounts, to
judge the effect of monetary policy
on underlying inflationary trends
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

6. Year-on-Year Inflation Continues Downward Trend
 Still another way to remove monthto-month volatility is to look an yearon-year changes in the CPI
 Year-on-year data also avoid any
distortions due to seasonal
adjustment
 This chart shows the change in the
CPI from the same month a year
earlier
 The trend of inflation has clearly
been downward over the past two
years
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

7. The Bottom Line
 The bottom line is that inflation
remains quiet, with a downward
trend
 If we take 2 percent as a reasonable
target rate of inflation, the latest data
give little reason to with draw fiscal
or monetary stimulus at this time
Posted Nov. 2, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

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