Turning to overall inflation, earlier this year, reports indicated that the Federal Open Market Committee’s (FOMC) preferred measure of inflation—the headline measure of consumer price inflation on a national accounts basis—had, on a 12-month change basis, risen close to the FOMC’s objective, but the latest figures have edged down somewhat as the rebound in energy prices has abated.
I tend to place greater weight on the core measure of inflation, which abstracts from the transitory movements in energy prices and is a better predictor of future inflation. In the April report, the core measure—that is, excluding food and energy prices—had increased only 1.5 percent on a 12-month change basis. That reading marks a considerable shortfall from the Committee’s 2 percent objective.