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Saturday, April 01, 2006

PCE Trimmed Mean Inflation

The Dallas Fed released the U.S. Trimmed-Mean PCE Inflation Rate on Friday. Here are the figures (A, B, and C are defined below):

1 Month PCE Inflation, Annual Rate
              A       B       C
Sep 05      12.0     2.6     3.0
Oct 05       2.8     3.1     2.9
Nov 05      -5.1     1.8     1.6
Dec 05      -0.1     1.6     1.5
Jan 06       6.0     2.0     3.1
Feb 06       0.5     1.5     1.8
6 Month PCE Inflation, Annual Rate
              A       B       C
Sep 05       4.4     1.6     2.2
Oct 05       4.0     1.9     2.4
Nov 05       3.0     1.8     2.2
Dec 05       2.9     1.9     2.3
Jan 06       3.3     2.1     2.5
Feb 06       2.5     2.1     2.3

12 Month PCE Inflation, Annual Rate
              A       B       C
Sep 05       3.8     2.0     2.3
Oct 05       3.5     2.0     2.3
Nov 05       2.8     1.9     2.3
Dec 05       2.8     2.0     2.2
Jan 06       3.1     1.8     2.2
Feb 06       2.9     1.8     2.2
A = PCE (Personal Consumption Expenditures)
B = PCE excluding food & energy
C = Trimmed mean PCE (Trims 19.4% from the
        lower tail, 20.4% from the upper tail)

The site provides historical data for the 1, 6, and 12 month trimmed mean PCE (column C, defined here) going back to 1978. Here's a graph of these data:

If you are a monetary policy maker what do you conclude? As I look at these data, particularly the more stable 12 month measures, as I consider the up and down data recently observed for measures of aggregate activity, and as I think about the long lag between the time the federal funds rate is changed and the time the policy is fully reflected in inflation and output, I begin to wonder if going past a target federal funds rate 5.0%, or even to 5.0% if incoming data show any further weakness or uncertainty, is wise.

    Posted by on Saturday, April 1, 2006 at 12:43 AM in Economics, Inflation, Monetary Policy | Permalink  TrackBack (0)  Comments (8)

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