Data for the Classroom from
Ed Dolan’s Econ Bloghttp://dolanecon.blogspot.com/ US Price Data: CPI Revisions Cut Volatility,January Inflation Up a Bit Posted February 18, 2012 Terms of Use: These slides are made available under Creative Commons License Attribution— Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishers.

CPI Inflation Speeds Up a
Bit in January The US all-items CPI showed a moderate increase in inflation in January, reflecting stronger growth of the economy The January headline inflation rate from the Bureau of Labor Statistics, stated as an annual rate, was 2.43% Prices increased across the board, including food, energy, shelter, apparel, and recreation Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Revisions Remove Volatility from 2011
Data The BLS report included revisions to previously reported 2011 data based on updated seasonal adjustment factors The revisions did not affect the year- on-year inflation rate for 2011, but they removed a large part of the volatility from the monthly data Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Core Inflation Also Rises in
January Food and energy prices are highly volatile and usually account for much of the month-to-month variation 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. In January 2012, however, the food and energy inflation rates were the same as the all-items rate, so the core and headline CPI did not differ Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Trimmed Mean Inflation Also Rises
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, whatever they are Trimmed mean inflation was a moderate at just under 3% for January, stated as an annual rate Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Which Measure is Best? The
CPI for all items gives the most accurate picture of current changes in the cost of living Economists at the Fed look closely at the core and trimmed mean CPIs to judge the effect of monetary policy on underlying inflationary trends The Fed considers inflation of about 2 percent to be consistent with prudent monetary policy All three measures of inflation were moved slightly above the Fed’s 2% target in January Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

The Longer Term Trend To
see longer term trends in inflation, it is useful to look at year- on-year changes, which compare each month’s price level with that of the same month in the year before All y-o-y measures of inflation rates slowed during the global recession, then rose againfor most of 2011. The three measures shown here have been converging in recent months as inflation becomes less volatile Posted February 18, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com