Have you seen these two Inflation Charts?

giving you insight beyond Powell's Core Services ex Shelter

This will be a short post. I don’t think looking at Powell’s favorite inflation measure, the Core Services ex Shelter CPI, provides the full picture of lingering price pressures. Instead, here are two charts two broaden your view.

The Core Services ex Shelter CPI - not reported separately by the Bureau of Labor Statistics - rose at a 3-month annualized pace of 3.8%. While this is slower than the reported headline and core inflation of 6.4% and 5.6%, respectively, it’s not really close to the 2.0% target either.

The chart below shows how Core Services ex Shelter stacks up against other measures of inflation:

Services ex Shelter 4.1% (↑)

Services 6.5% (↑)

Services ex Energy 6.8% (↑)

If you look at the broader Services sector, all inflation numbers beat that of the Core Services ex Shelter. Labor shortages, hence wage growth pressures, are not confined to Core Services.

Median CPI

Instead of stripping out certain parts of the CPI basket, another way to get an idea of ‘general’ or ‘underlying’ inflation is by scrutinizing the ranked price changes of all items in the CPI basket.

This is precisely what the Cleveland Fed’s Median CPI does. It reflects the one-month inflation rate of the component whose expenditure weight is in the 50th percentile of price changes.

The Median CPI rose 0.65% in January, compared to 0.41% of Core CPI. This was the third-biggest increase in history and marked a second month of accelerating median price inflation. But there’s more. The 3-month annualized median inflation rate is 7.0%, and the year-on-year increase is 7.1%.

If you take these inflation charts into account, and add the strong payroll number and the massive 3.0% monthly retail sales growth, do you think FOMC members - most of whom penciled in a higher than the 5.125% median Dot Plot peak Target Rate - feel more or less conformable that inflation will go back to target any time soon?