A Wall Street Journal editorial “The Fed’s Big Inflation Miss” hinges on a graph showing the year-to-year percentage increase in the consumer price index (CPI) “increased at an annual 5.4% rate in June, after rising 5% at an annual rate in May. The Fed is way behind the price curve. Price increases would have to decline precipitously in the next six months to get close to the Fed’s median June forecast of 3.4% for 2021.” By the measure cited, however, the average of the past six monthly year-to-year changes was 3.35%.
One source of this and other misunderstandings comes from the habitual media use of year-to-year percentage changes to approximate what happened to prices month by month.
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