As if inflation wasn't "mysterious" enough to the Fed already, recently the New York Fed joined the Atlanta Fed in releasing its own measure to track underlying inflation called, simply, the Underlying Inflation Gauge. What is notable is that this latest inflation tracker shows prices behaving quite differently from traditional indexes this year.
According to the UIG's August measure, broad inflation came in at a red hot 3.27%, the highest since September 2005. That compares with just 2.8% annual inflation according to the Labor Department’s CPI and an even more modest 2.0% as measured by the preferred PCE gauge of Fed policy makers....
Although I do not bill myself as a forecaster, my generic inflation forecast has remained remarkably accurate: expect it to stick around 2%, barring a recession. Although this has been the correct forecast for years, it does not match what people want to hear: higher inflation (or deflation!) is around the corner! (This generic forecast is for the United States and Canada, but I will stick to U.S. data for this article.) To a certain extent, the entire social position of mainstream economics is based on their ability to sound very serious about inflation, and just saying that inflation will probably stick around 2% does not sound serious at all. This article is an update on my views on inflation, which obviously have not moved very much....
Bond Economics
Expect More Of The Same On The Inflation FrontBrian Romanchuk
