{"id":516481,"date":"2010-04-05T13:15:37","date_gmt":"2010-04-05T17:15:37","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/04\/05\/a-deeper-look-at-the-feds-inflation-debate\/"},"modified":"2010-04-05T13:15:37","modified_gmt":"2010-04-05T17:15:37","slug":"a-deeper-look-at-the-fed%e2%80%99s-inflation-debate","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/516481","title":{"rendered":"A Deeper Look at the Fed\u2019s Inflation Debate"},"content":{"rendered":"

As the Wall Street Journal reported today<\/a>, the Federal Reserve<\/strong> is going through an intensifying debate about whether inflation is receding even as the economy recovers. Analysts at the San Francisco Fed and New York Fed jump into the fray today<\/a>, with a rebuttal directed at officials who say inflation isn\u0092t slowing down.<\/p>\n

The researchers — Bart Hobijn<\/strong>, Stefano Eusepi<\/strong> and Andrea Tambalotti<\/strong> — say the inflation slowdown is widespread. They examine fifty goods and services tracked in the Fed\u0092s preferred measure of inflation, the personal consumption expenditures price index excluding the volatile food and energy sectors, or core PCEPI.<\/p>\n

This preferred inflation measure has slowed from a 12-month change of 2.7% in the summer of 2008 to a 12-month change of 1.3% in February. But skeptics say much of the change is being caused by housing and isn\u0092t widespread.<\/p>\n

The researchers find that the inflation rate has slowed in most of the fifty categories in the past year and a half, relative to the previous 3.5 years, with big slowdowns in jewelry, transportation, luggage, hotels and electronics equipment. In some of the categories where the inflation rate has picked up, including new card and used cars, they argue the pickup was likely influenced by the government\u0092s cash-for-clunkers program and was thus transitory.<\/p>\n

Disinflation — which is a slowdown in the inflation rate — \u0093has been a widespread phenomenon,\u0094 they conclude. Deflation in some of these categories — like electronics — has deepened.<\/p>\n

This isn\u0092t likely to be the final word on the subject. By focusing on trends in the past year-and-a-half, as opposed to the past 12 months, the authors are picking up some of the disinflation that occurred in the very early stages of the recession, after the shock of Lehman Brothers\u0092 failure hit the economy. But Mr. Hobijn says his result is similar using shorter time periods.<\/p>\n

The researchers also try to rebut the argument that housing has been the main cause of a recent slowdown in the core PCEPI index, and a slowdown in comparable consumer price index measures which exclude food and energy. (Economists exclude food and energy because prices are very volatile in these sectors and thus can mask longer-term inflation trends.)<\/p>\n

It is true that shelter costs have slowed sharply. Some of that is because rents and housing costs are down. Some of it is also because hotel prices (which are counted as shelter costs in some of the government\u0092s measures) have fallen sharply. Mr. Hobijn finds that if you strip out the cost of renting or owning a home but not hotels from the core PCEPI index, it is up 1.55% from a year earlier, not much different than the change with housing costs included.<\/p>\n

The inflation slowdown, in other words, is real, he says. Those words will please his boss, San Francisco Fed president Janet Yellen<\/strong>, one of the Fed\u0092s leading proponents of the view that inflation is slowing and will continue to do so, reason to keep monetary policy easy.<\/p>\n

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As the Wall Street Journal reported today, the Federal Reserve is going through an intensifying debate about whether inflation is receding even as the economy recovers. Analysts at the San Francisco Fed and New York Fed jump into the fray today, with a rebuttal directed at officials who say inflation isn\u0092t slowing down. The researchers […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-516481","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/516481","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=516481"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/516481\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=516481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=516481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=516481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}