By John Carney
Two economic figures meant to capture underlying pricing pressures rose sharply in August, indicating that the economy is still experiencing a very high inflation.
The Federal Reserve Bank of Cleveland calculates both median inflation and “16 percent trimmed mean” inflation, measures that exclude outlier moves in prices that counted in the Consumer Price Index to reveal underlying inflationary pressures. Both showed that inflation accelerated in August.
The median Consumer Price Index, which reflects only measures in the center of CPI’s prices changes, rose 0.7 percent compared with the prior month, an acceleration from the 0.5 percent increase recorded in June. The unrounded figure of 0.73789 percent is the highest on record, slightly above the previous record of 0.73078 percent set in June.
This is equivalent to an annual rate of inflation of 9.2 percent. That is the highest on record.
Compared with a year ago, the median CPI is up 6.7 percent. That is also a record high in data that goes back to 1983.
The median CPI, which excludes all the large changes in either direction and is better predicted by labor market slack, is out and is extremely ugly. A 9.2% annual rate in August, the single highest monthly print in their dataset which starts in 1983 (second highest was in June). pic.twitter.com/4W6XDLdJXA
— Jason Furman (@jasonfurman) September 13, 2022
The Cleveland Fed’s trimmed mean inflation gauge excludes the CPI components that show the most extreme monthly price changes. This rose 7,2 percent compared with a year ago, also a record high going back to the early 1980s. Compared with the prior month, this was up 0.6 percent. That was the fourth highest ever, after May and June of this year and October of last year. Both were higher than the figures reported for July.
Both trimmed mean and median CPI measures are thought to better indicate underlying inflation—and better predict future inflation—than both headline and core inflation. They get rid of “noise” removing prices that moved erratically in a given month.