TMF - An Inflation Resurgence Or Just Relative Price Changes?

2024-02-14 10:15:00 ET

Summary

• The overall inflation numbers seem to be picking up a significant relative price effect, which is not macroeconomic but microeconomic.
• If we focus on more recent price trends, the inflation picture looks more favorable.
• Stubbornly keeping policy tight even after the macroeconomic indicators reach their desired levels will make the public more suspicious of the Fed, not less.

By Alexander William Salter

The Bureau of Labor Statistics ((BLS)) announced that inflation as measured by the Consumer Price Index (CPI) was 3.1 percent year-over-year in January. Core inflation, which excludes volatile food and energy prices, was slightly higher at 3.9 percent. The main driver was shelter. BLS's press release notes that the shelter index rose 0.6 percent last month, "contributing over two-thirds of the monthly all items increase." The overall inflation numbers seem to be picking up a significant relative price effect, which is not macroeconomic but microeconomic....

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