Odd Lots Omair Sharif Explains How Inflation Measures Really Work
Sep 2, 2021
Omair Sharif, the founder and president of Inflation Insights, dives deep into the often-misunderstood world of inflation metrics. He explains the complexities behind the Consumer Price Index (CPI) and core Personal Consumption Expenditures (PCE), highlighting how these indices reflect economic realities. Omair discusses the challenges of forecasting inflation in light of recent changes by the Federal Reserve, and even examines unique topics like owner's equivalent rent and the bullwhip effect. For a creative twist, he also shares ideas for a CPI-themed coffee table book!
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Rent vs. Transitory Factors
- Rent and OER are rising but unlikely to match private market data magnitudes.
- Increases in rent will likely be offset by decreases in transitory factors like used car prices.
Defining Transitory Inflation
- Transitory inflation refers to how long accelerating price changes continue.
- Dispersion and momentum within CPI, and price level versus pre-pandemic trends, offer clues.
Inflation Breadth
- Inflation hasn't broadened significantly beyond a few key components.
- Price movements often reflect methodology and seasonality, not macro narratives.