Paul Krugman On Fed's Supercore' Inflation Measure: 'Dog's Breakfast' Of Strange Items

On Sunday, Nobel laureate Paul Krugman, expressed skepticism regarding the Federal Reserve’s measure of “supercore” inflation, suggesting that it might not be a reliable indicator of underlying inflationary pressures.

What Happened: In a series of posts on X, formerly Twitter, Krugman pointed out that while most inflation news has been positive, the Fed’s “supercore” measure, which excludes shelter, has been the exception. He questioned the reliability of this measure, referring to it as a “dog’s breakfast” of odd items.

In a subsequent post, he cited a note from Apollo’s Torsten Slok which attributed the rise in “supercore” to inflation in sectors like financial services, transportation, food services, amusement parks, and sports. Krugman questioned how much of this truly reflects fundamental inflationary pressures.

In his concluding post, Krugman expressed hope that the Fed would cease referencing this particular indicator, dismissing it as mere “noise”.

See Also: Fed’s Loretta Mester Says We Only Get A Trophy If Inflation Hits 2%

Why It Matters: Krugman’s critique comes at a time when inflation remains a hot topic, with the Federal Reserve’s measures under scrutiny.

The Personal Consumption Expenditure (PCE) price index, the Fed’s primary inflation gauge, has been showing signs of declining inflation.

However, the core PCE, which offers a more accurate insight into underlying inflation trends, has been on the rise.

The debate on the reliability of these measures is crucial as they influence the central bank’s decisions on interest rates, which have wide-ranging implications for the economy.

Photo by TANYA LARA on Shutterstock

Read Next: After Fed’s Jerome Powell, G7 Central Bank Chief Fires A ‘Higher For Longer’ Rate Warning