Inflation

Inflation has three sources — demand, supply and expectations. Each needs a different response. Confusing them is the most common error in the commentary.

Why this matters

Inflation is not one thing. Demand-pull comes from spending outrunning capacity; cost-push from a supply shock working through prices; expectations from people believing prices will rise and behaving accordingly. The policy response to each is different — and so is whether it fades on its own.

Reading an inflation print properly means decomposing it. Headline versus core separates the volatile food-and-energy layer from the persistent trend; month-on-month versus year-on-year separates what just happened from what has accumulated. Why 0.3 is worse than 3.4 is the lesson that makes the distinction concrete.

This step is where commentary most often misleads, because a single number can be recruited for opposite arguments. Once you can name which of the three is driving a print, you can tell an argument from a talking point.

Watch

• Macro Musings (David Beckworth) ↗
  Central-bank-heavy interviews with the people who study inflation for a living. The right register for the governance side of the site.
• Odd Lots (Bloomberg) ↗
  Joe Weisenthal and Tracy Alloway get practitioners to explain the current inflation debate without the shouting.

Read — our own explanation

• Three Ways Inflation Happens
• CPI
• Core Inflation
• Inflation Expectations
• Why 0.3 Is Worse Than 3.4

Verify at the source

• US Bureau of Labor Statistics — CPI release ↗
• Cleveland Fed — Inflation Nowcasting ↗

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