Inflation rose at a 4% annual rate in May, the lowest in 2 years

[progree]

11. I look at the Core, because its my understanding that's what the Fed focuses on and

considers the best predictor of FUTURE inflation (as do I). That's because energy and food price changes (components of the regular CPI but not the core CPI) are far more volatile and bounce around from month to month. The Fed can't change course based on a sudden one or two or a few months fuel price drop or increase, nor should they.

I haven't read anything differently. So I'm not particularly giddy bubbly boo about this inflation report. Au contraire, I'm disappointed that the core is stuck where its stuck at more than twice their 2% target.

As you probably know, I don't give a rat's ass about yoy changes, as I think they are less than virtually worthless in assessing CURRENT or RECENT inflation. In particular, the change in the yoy number from one month to the next is affected by 2 things, and only 2 things: the newly added most recent month (as of course it should), and the ancient ancient number that dropped out of the series 12 months ago.

I look at rolling 3 month averages for its recency, but less affected by a one-month outlier number than just using the lastest one month. I consider the rolling 3 month as sort of a smoothed version of the most recent

The rolling 3 months of the CORE CPI over the last 6 months:
4.3% 4.6% 5.2% 5.1% 5.1% 5.0%

The first number is the 3 month average Oct'22 - Dec'22
The second number is the 3 month average Nov'22 - Jan'23
The third number is the 3 month average Dec'22 - Feb'23
and so on with the last number being the 3 month average Mar'23-May'23

Obviously it's pretty much flat-lined at more than 2X the Fed's 2% target.

On housing prices - house prices aren't part of the CPI. They are considered an investment, not a consumption item. When a house is sold for a higher price, the previous owner gains while the new owner loses. I know that's controversial, but that's life in sucksville.

Rather they look at rent and owner equivalent rent (the latter an owner's estimate of what it would rent for. This is what the owner loses out on by occupying the residence rather than renting it out).

I've been hearing ever since September about how rent is a lagging number and how new rents are dropping and its going to make the CPI and CORE CPI wonderful. Ever since September. (Housing aka shelter is 40% of the Core CPI and 1/3 of the regular CPI if I'm remembering the numbers correctly).