Sir, I refer to your editorial “The economy is too weak for inflation to return” August 14, 2020.
No! The inflation has already returned, it is just not being measured
yet.
The Consumer Price Index (CPI) market basket is developed from detailed expenditure information
provided by families and individuals on what they actually bought, and there
is a time lag between the expenditure survey and its use in the CPI.
The consumption basket in a weak economy differs considerably from that of a
strong economy. Ask anyone who on a tight budget has recently gone to the
grocery store, and you can be sure he will complain about rampant
inflation.
PS. TIPS (Treasury Inflation-Protected Securities) are based on CPI while
the Fed targets PCE. Does this have any implications?
PS. In these in real time information times, I am amazed there’s still a long time lag between the expenditure survey and its use in the CPI.
PS. What if the CPI market basket was developed from detailed information provided by families and individuals about what they would have wanted to be able to buy if its prices had not gone up?
Not the first time I have questioned CPI/Inflation
PS. The truth, in theory and in practice, is that everybody's inflation, might be nobody's inflation.
@PerKurowski