August CPI – Nowcasts

The CPI release for August numbers is tomorrow. As of today, here are the Cleveland Fed nowcasts for CPI and Core CPI:

Figure 1: CPI (blue), CPI nowcasts (light blue), Bloomberg consensus CPI (red triangle), Core CPI (red), Core CPI nowcasts (pink), Bloomberg consensus core CPI (inverted brown triangle), all 1982-84=100, on log scale. NBER defined recession dates shaded gray. Source: BLS, Cleveland Fed (as of 9/10), Bloomberg (accessed 9/12), NBER, and author’s calculations.

Inflation expectations are rising — but below recent peaks — when using a simple breakeven calculation of Treasury and TIPS five year yields.

Figure 2: Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by inflation risk premium and liquidity premium per DKW, all in %. Source: FRB via FRED, Treasury, KWW following D’amico, Kim and Wei (DKW) accessed 9/12, and author’s calculations.

However, adjusting for estimated inflation and liquidity premia, expected CPI inflation over the next five years remains fairly low at 1.64%.

For cross-country monthly/quarterly/annual inflation data 1970-2021, see this post.

 

 

 

5 thoughts on “August CPI – Nowcasts

  1. rjs

    i imagine i’m supposed to know why “Georgia” is highlighted to start the new year on that Treasury-TIPS spread graph, but i don’t…

    Reply
    1. Moses Herzog

      Ossoff elected roughly January 5. I think this must be it. My eyes aren’t what they used to be, but it looks like very early January. It is kind of an interesting choice of dates to demarcate. I would think Jan 6 certification would almost be more worth highlighting there. I don’t know. Wouldn’t be the first time something of significance flew over my head.

      Would also be interesting to know if the September 18 (Saturday) protests will effect that graph line. If they get more National Guard troops in there than I am reading they have now (not very many) I wouldn’t think it would effect the graph too much. I’ll be watching that day for sure—because I still don’t think they’ve committed enough National Guard at the Congress and different DC landmarks, so from my view they’re still leaving the door open (no pun intended) for trouble.

      Reply
      1. Menzie Chinn Post author

        Moses Herzog: Ossoff and Warnock elected, bringing Democratic Party caucus to 50, so that possibility of Biden getting through big bills via reconciliation rises; that in turn means more deficit spending and hence (holding all else constant) higher interest and inflation rates (using conventional macro models).

        Reply
        1. Moses Herzog

          Makes sense.

          This kind of indirectly gets back to Stacey Abrams too doesn’t it. I was slow to register how much her efforts helped tilt the scales there. The electorate in Georgia was going to change either way, but I think it can’t be denied she shoved it a long and sped up the timeline. If you’ll forgive me for bringing this up again (you know me) uhm, one of the things that is like the aggravating pea underneath the mattresses of the Democrat party is they think they have an “I owe you” to people like Neera Tanden, when the real “I owe you” should be with Stacey Abrams.

          Reply

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