Data for the Classroom from
Ed Dolan’s Econ Bloghttp://dolanecon.blogspot.com/ US Inflation Data:Seasonally Adjusted CPI Shows Zero Change in April Posted May 19, 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.

Headline CPI Inflation Drops to
Zero in April The headline number in the latest BLS inflation report, the seasonally adjusted Consumer Price Index (CPI- U) showed zero change in April Using unrounded data and stating the monthly change at an annual rate, seasonally adjusted inflation was 0.36% Without seasonal adjustment, the CPI rose at a 3.7% annual rate in April Posted May 19, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Core Inflation Shows Little Trend
in Recent Months Food and energy prices are volatile and usually account for much of the month-to-month change 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. The monthly change in core inflation, stated at an annual rate, was 2.92 percent in April, about the same as in March. Motor fuel prices, which rose much less than usual in April, accounted for much of the difference between the all-items CPI and the core CPI Posted May 19, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Trimmed Mean Inflation Drops Below
Core Inflation 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 The 16 percent trimmed mean CPI increased at an annual rate of 1.94 percent in April, down about half a point from the March rate Posted May 19, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Which Measure is Best? The
CPI for all items gives the most accurate measure 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 Of the three measures shown, only core inflation exceeded the Fed’s target in April Posted May 19, 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 again for most of 2011. The three measures shown here have converged values just over 2 percent in 2012 as inflation has become less volatile Posted May 19, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com