Post by Admin/YBB on Dec 24, 2020 8:24:00 GMT -6
Which #INFLATION? There is the broad consumer price index [CPI] that has headline & core [ex volatile food & energy] values. Urban CPI-U covers 93% of the US population; US Savings I-Bonds use CPI-U for recent 6 months to set variable rates on May 1 & Nov 1. Chained C-CPI-U accounts for typical consumer substitutions [e.g. if item A is more expensive, consumers may switch to item B instead]. Wage earners/clerical workers CPI-W covers 29% of US population & is used by #SocialSecurity to compute annual COLA [Q3 vs prior year Q3]. Personal consumption expenditures [PCE] are based on consumer spending on goods & services & PCE price index is preferred by the #FederalReserve; it also has headline & core [ex food & energy] values. The PCE has lagged CPI for years & some question whether the Federal Reserve is using a correct measure for its #MonetaryPolicy that now includes 2% average PCE inflation. Producer price indexes [PPI] are reported for manufacturing & services & are used by businesses as wholesale price indicators.
Market-based #InflationExpectations are the differences between the yields of Treasuries & TIPS [Treasury inflation-protected securities] of comparable maturities; these can move quickly; TIPS yields are also called real yields. Some financial firms have their own proprietary inflation indicators & they hope to benefit from noticing inflation trends early; the government inflation data are reported publicly on rigid schedules. Investors want their most conservative investments to keep up with or beat inflation; retirees also want their income to beat inflation. Economies want to avoid serious harm from #deflation [e.g. #GreatDepression of 1929-39], so their central banks aim for small amounts of inflation, & if they miss the goal by a bit, that is OK. #PersonalFinance , 12/24/20.
Market-based #InflationExpectations are the differences between the yields of Treasuries & TIPS [Treasury inflation-protected securities] of comparable maturities; these can move quickly; TIPS yields are also called real yields. Some financial firms have their own proprietary inflation indicators & they hope to benefit from noticing inflation trends early; the government inflation data are reported publicly on rigid schedules. Investors want their most conservative investments to keep up with or beat inflation; retirees also want their income to beat inflation. Economies want to avoid serious harm from #deflation [e.g. #GreatDepression of 1929-39], so their central banks aim for small amounts of inflation, & if they miss the goal by a bit, that is OK. #PersonalFinance , 12/24/20.