U.S. Inflation
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Basics
- On the origin and evolution of the word inflation
- The consumer price index as a measure of inflation
- Is it more expensive, or does it just cost more money?
- Bad standards
Research
News release: February 21, 2007
16% TRIMMED-MEAN CPI
Beginning in February, the Federal Reserve Bank of Cleveland will incorporate its 16% trimmed-mean CPI inflation measure into the press release for the median CPI in response to public inquries for a timely release of this data series. This inflation measure is currently posted to our website and published in the Federal Reserve Bank of Cleveland’s monthly publication, Economic Trends.
The 16% trimmed-mean CPI eliminates components showing extreme monthly price changes—in this case, 8 percent of the weighted components with the highest and lowest one-month price changes are eliminated and the mean is calculated from the remaining components. The median CPI is classified as a trimmed-mean measure which essentially eliminates 49½ percent of the weighted components from each tail of the weighted monthly price change distribution to obtain the median, or middle, component price change. Research has shown that extreme price changes often prove transitory and therefore obscure the underlying, persistent inflation trend and that trimming the data can help to improve the inflation signal in the monthly CPI data. Indeed, the 16% trimmed-mean CPI is much less volatile than either the CPI or the more traditional core CPI and at high frequencies, is also a relatively more accurate indictor of future inflation (for further information, see this article). For this reason, we monitor this statistic as another potentially useful guide in evaluating U.S. inflation patterns.
