Year-on-year headline and core inflation both down, but both slightly above consensus (with headline at 6.4% vs. 6.2% Bloomberg consensus). (Month-on-month both at consensus, given rounding). Other measures provide ambiguous signals.

First, we have various measures of overall CPI at m/m changes.

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Figure 1: Month-on-month inflation of CPI (blue), chained CPI (brown), 16% trimmed CPI inflation (red), sticky price CPI inflation (green), personal consumption expenditure deflator inflation (black), all in decimal form (i.e., 0.05 means 5%).January PCE deflator is Cleveland Fed nowcast of 2/14. Chained CPI seasonally adjusted log levels X-13 (brown). NBER defined recession dates (peak-to-trough) shaded gray. Source: BLS, BEA, Atlanta Fed, Cleveland Fed, and author’s calculations.

All month-on-month measures save sticky price CPI inflation rise in January. However, we know that month-on-month changes, while providing a more contemporaneous reading on inflation, have a larger noise component. Hence, I plot in Figure 2 m/m versus median, core and instantaneous (per Eeckhout) inflation (t=12, a=4).

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Figure 2: Month-on-month CPI (black circle), and instantaneous inflation (τ=12, a=4) (bold teal), month-on-month median inflation (purple), month-on-month core CPI inflation (tan), all at annual rates. NBER peak-to-trough defined recession dates shaded gray. Source: BLS, NBER, and author’s calculations.

Instantaneous (τ=12, a=4) inflation is up to 4.4% from 3.4% in December (using CPI revised up through December, incorporating new seasonals), but is still far less than 11.4% in June 2022. (For additional discussion of instantaneous inflation, see this post.)

Second, core inflation measures have stabilized at the m/m horizon (and continue to descend at y/y).

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Figure 3: Month-on-month CPI core inflation (blue), chained CPI core (brown), personal consumption expenditure core deflator inflation (black), all in decimal form (i.e., 0.05 means 5%).January PCE deflator is Cleveland Fed nowcast of 2/14. Chained CPI seasonally adjusted log level using X-13 (brown). NBER defined recession dates (peak-to-trough) shaded gray. Source: BLS, BEA, Atlanta Fed, Cleveland Fed, and author’s calculations.

Fed funds (CME) futures imply no change to rates at the March 22 meeting, but slightly higher for May and June.

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