Tuesday, March 29, 2011

Why the Fed's Core Inflation Method Is Not an Accurate Indicator

The Intermarket Edge submits:

The core inflation method used by the Fed is not an accurate reflection of inflation, nor an 'indicator' in any sense of the word. It is a backward looking, 'lagging' indicator. To get a grip on how the pressures of global inflation are building, one must look beyond labour costs and start considering the very real nature of rising prices in raw materials.

The CPI calculations have been changed so much over the last 30 years that most retail traders may not even know what it measures anymore.

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One can only wonder why such grand differences exist. The largest component of the CPI is housing, right? The biggest change in the CPI was made in 1983. During this time, CPI methods changed and stopped using housing prices as the main component, switching instead to the subtle 'owners equivalent rent'. This new method is described as "the amount


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Dido Joss Stone Majandra Delfino Maria Bello Jennifer Gareis

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