The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.9% annualized rate) in February. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.6% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.7% (8.5% annualized rate) in February. The CPI less food and energy increased 0.2% (2.1% annualized rate) on a seasonally adjusted basis.
Note: The Cleveland Fed has the median CPI details for February here. Motor fuel increased at a 180% annualized rate in February! That was a sharp increase, but prices have fallen a little in March.
This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 2.0%. Core PCE is for January and increased 1.3% year-over-year.
On a monthly basis, median CPI was at 2.9% annualized, trimmed-mean CPI was at 2.6% annualized, and core CPI increased 2.1% annualized. Also core PCE for January increased 1.8% annualized.
The Fed has been clear that their 2% inflation target is not a ceiling, and that they will tolerate some short term increases in inflation as long as the unemployment rate remains elevated and inflation expectations remain “well anchored”. From the recent FOMC statement: “the Committee … currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored”.
The Fed will meet next week, and with this level of inflation and the current high level of unemployment, I expect the Fed will keep the “pedal to the metal”.