CPI Headline, Core Inflation Nowcasts And Forecasts

From Popina, McCormick, and Beyoud, “Traders lose trust…” in Bloomberg today:

Source: Popina et al., Bloomberg, 11 January 2023.

I thought it of interest to compare against the Cleveland Fed’s nowcast. Here are the levels of headline and core CPI.

Figure 1: CPI level, 1982-84=100 (black), Cleveland Fed nowcast as of 1/11/2023 (pink square), high and low forecasts (gray +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author’s calculations.

Figure 2: Core CPI level, 1982-84=100 (black), Cleveland Fed nowcast as of 1/11/2023 (pink square), high and low forecasts (gray +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author’s calculations.

What does this mean for core inflation? In Figure 3 I plot the actual and implied inflation rates.

Figure 3: Quarter-on-quarter core CPI inflation rate, annualized (black), Cleveland Fed nowcast as of 1/11/2023 (pink square), high and low forecasts (gray +). Source: BLS via FRED, Cleveland Fed, Bloomberg (1/11/23), author’s calculations.

Even with the high estimate of the Cleveland Fed’s nowcast, core inflation is decreasing on a q/q basis.

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