There was very little said about today´s CPI release. Funny that when inflation remains below target we don´t hear much, unlike earlier this year when it was thought that inflation was climbing towards the 2% target!
The Fed targets PCE inflation, which on average comes about 0.4 points below CPI inflation. The charts below give a pretty good indication that inflation has not been a problem for quite some time, particularly if you track the Core versions of the indices, which take out the noise from things like oil and commodity shocks!
The final chart illustrates how (CPI) long-term inflation expectations have behaved. Interesting to note that before the crisis hit, both the TIPS and Cleveland Fed measures of expected inflation were quite similar. I have no idea why that changed after 2008, but maybe they are “joining-up” again.
The charts seem to indicate that what the Fed has wanted for some time is really to keep inflation within a 1%-2% (1.4%-2.4%) band for the Core PCE (Core CPI). And they are doing a damn fine job, no matter what else is (not) happening!