Where's the inflation? (installment 2)

I'm still waiting for inflation to reveal itself.  The Dallas Fed just published some new PCE inflation results, and I also checked the Cleveland Fed's CPI inflation. (PCE = personal consumption expenditures; CPI = consumer price index.)  It still seems to be hiding just around the corner. 

Keeping in mind that the proper goal is controlling inflation to within a band of 2%-3%, I see even less evidence of inflation danger in the latest numbers than I did a few days ago.  (As I've said before, I like the trimmed-mean methodology, because it trims the month-to-month, near-meaningless noise out of the results.)

The charts are below.  Can you spot any problem yet?  I can't; as long as prices and wages inflate at a predictable 2.5%, we don't have a problem.

Click to enlarge: 

On the other hand, I do not try to forecast inflation or interest rates, so I'll just have to keep a close eye on the actuals.  Lots of pundits (and also lots of journalists) are still forecasting an inflation spike.  Hmm, maybe next month...

Comments

[Charlie]

I still think it is misleading to point to "Inflation bond market's opinion" as such, when it doesn't account for illiquidity risk that is substantial (The TIPS market is much smaller than the tresuries market).

The Cleveland Fed estimates the risk adjusted inflation expections of the TIPS market here:

http://www.clevelandfed.org/research/inflation/TIPS/index.cfm

[woodchuck64]

Inflation going into a recession is always a temporary thing. Gear up for deflation.

[William]

From this data it seems as though things haven't appreciably changed on the inflation front for the last four years. Very good to read some facts when so many are fear mongering based on nothing about the economy (but more money for me when I bet against them by buying things up at fire-sale prices!).

I recently read an encouraging article on the "wealth gap" that some might also find worthwhile: http://www.nytimes.com/2008/02/10/opinion/10cox.html?_r=2&ref=opinion&oref=slogin&oref=slogin

[Harun]

I don't know if this is actually part of "inflation: or not, but we just had a sudden spike in steel prices - up about 20% in one go - in China along with wages up 30%, packaging, aluminum, glass, all up in double digits. This is in addition to appreciation of the Yuan.

We have had to raise our prices to customers by about 20-30%. The customers have not liked this, and the retailers are still fighting it, but at the end of the day, with hikes like that the retail prices have to go up.

Now, because we're in a "recession" people aren't buying as much stuff, does it matter if the prices go up for non-food items?