Fed's Lacker and Inflation: Reality Check

by: Bespoke Investment Group August 19, 2008    

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In an interview today with Bloomberg TV, Richmond Fed President and inflation hawk Jeffrey Lacker made several comments regarding inflation.  In the interview, he said that he regards core inflation of 2.5% as a 'little high', and would prefer a rate of 1.5%.  Looking at core inflation over the last 50 years, using the core CPI shows that readings at or below Lacker's preferred rate have been rare.  Over the last 50 years, over 90% of all monthly core CPI readings have been above 1.5%.  During that same period, the average core inflation reading has been 4.1%, which is nearly three times Lacker's preferred reading.  While we don't want to minimize the very real threat of high inflation, we would note that Lacker's preferred rate of inflation is as realistic as a $10 fill up at the gas station.

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This article has 2 comments:

  •  
    Aug 20 03:00 AM
    He meant in "current" BLS model, 1.5% core inflation is preferred. We can't compare apple to banana.
    Reply | Link to Comment
  •  
    Aug 20 02:41 PM
    All good points except you can't really believe the numbers. Going back 50 years gives you three different CPI calculation routines.
    Reply | Link to Comment
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