Here’s a somewhat niche measure of inflation: 6-month CPI excluding food, shelter, and energy. It might seem like a weird measure, as it excludes over half of the CPI. But there is a logic to at least considering it along with other measures.
Food and energy are both volatile, so they can give us a lot of noise. That’s why “core CPI” and other core measures are followed closely by the Fed and inflation watchers. But excluding shelter might also make sense, because increasing housing prices are largely due to supply constraints, and will move independently of monetary policy to some extent. Six-month inflation is also useful for a more timely measure than 12 months, the headline number.
As you can see in the chart above, this niche measure of inflation has been stuck for two and a half years. It has oscillated between about 0.5% and 1.5% since December 2022. And right now it’s almost exactly in the middle of that range. It has come down from 6 months ago, but higher than 1 year ago.
As you can see in the pre-2020 years, it generally oscillated between 0% and 1%. So 6-month inflation is stuck about 0.5% higher than we had become used to, which translates into roughly 1% higher annually.
In the grand scheme of things, 1% higher inflation isn’t the end of the world. But we do seem to be stuck at a slightly elevated rate of inflation relative to the decade before 2020.
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