Chart of the Month: What is the current rate of inflation? 

The price for everything seems to have gone up lately! Are we just pining for the days of 50-cent sodas, or have prices meaningfully increased?  And if they have...how much? 

The rate of inflation is extremely difficult to calculate in real-time. The US Bureau of Labor Statistics generates multiple measures using various formulas, weightings, and sources. Each has data inputs, which may be months behind or make broad assumptions in the estimate. 

Consumer Price Index (CPI) measures the out-of-pocket costs for regular purchases of goods and services to an urban consumer. It is the most widely known price index.  

Personal Consumption Expenditures Price Index (PCE) tracks total cost for goods and services including the share paid by consumers, employers, and governments (i.e. subsidies). This is the index the Fed most closely watches. 

Producer Price Index (PPI) follows prices received by domestic producers for their products and services. It was formerly known as the Wholesale Price Index. 

Core Inflation- focuses on a smaller number of goods and services - ignoring food and energy costs. 

Because of the different inputs, we anticipate different results for each.  Here are the most recent numbers:  

Yes, prices are higher than they used to be, making consumers and businesses uncomfortable. The Fed wants to use its powers to get Core PCE down to 2%.  

Are we headed that way? PCE and PCI are at or near their 12-month lows, suggesting inflation is coming down.  

We may not see fifty-cent sodas again, but hopefully, it will be a long time before they cost $5.00!