The Flawed CPI: The Fallacy Of Year-Over-Year Inflation Reporting

(Photo by Win McNamee/Getty Images)Getty ImagesFollowing the release of the August Consumer Price Index (CPI) the headlines were full of muscular scare-words.

“Resurgent US consumer prices…more angst… fresh signs of stubbornly high inflation” – The Financial Times
“Inflation accelerated in August…a surge in consumer prices” – The Wall Street Journal
“Price pressures remain stubborn…marking another month of accelerating inflation” – The New York Times
“Hot inflation data… inflation hasn’t gone away…the fight isn’t over….inflation is a more persistent threat than it has been in decades.” – Barron’s (various)
“Inflation is still troublingly high.” – CBS
“The inflation battle might not be over…inflation is not expected to reach the central banks’ 2% targets until 2025, meaning further pain for households and risks to the outlook.” – CNBC
“The Fed’s Inflation Battle Is Getting Tougher.” – Barrons again
“Inflation: Nouriel Roubini Calls Return to 2% ‘Mission Impossible’” – Youtube

Alas, all this excited messaging is just plain wrong.

The fact is that the post-pandemic episode of “inflation” in the U.S. is now essentially over. The Fed’s 2% target has nearly been achieved. The evidence is right there in the “official” figures.Recent Inflation Metrics, Year-Over-Year vs 3 or 6 month a …

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