By focusing on the middle of the price pack, the trimmed-mean gauge helps reveal just how widespread price pressures truly are
IT IS HARD to overstate the time that goes into calculating a consumer-price index. In America statisticians survey nearly 10,000 people every quarter, construct a sample of some 80,000 things they buy, and then monitor their prices by ringing up thousands of shops, restaurants and offices. So the hard-working boffins might be miffed to learn that the Federal Reserve thinks a better way of tracking inflation is simply to lop off the things with the biggest price swings.
The gap between the headline scare and the far more subdued alternative gets to the heart of the debate about whether the current burst of inflation is transitory or persistent. Those taking the former view argue that a small number of goods and services have driven the jump in inflation, almost all traceable to pandemic-related disruptions.
That, though, is unfair to the Fed. Central bankers have been tracking the trimmed measure since well before the pandemic. The Dallas Federal Reserve has published a version since 2005. A research note by Fed economists released in 2019 found that trimmed-mean gauges are less volatile than headline indices and better predictors of future price changes.
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