What’s the Inflation Rate? It’s a Surprisingly Hard Question to Answer
Microeconomic analysis suggests underlying inflation could be as low as 3%; macroeconomic analysis suggests it isn’t
What is the true rate of inflation? It is a critical question for the economy and financial markets, but a surprisingly difficult one to answer. There are credible arguments for above 8%, below 3% and almost anything in between.
The difficulty arises because how much prices have risen—the headline inflation rate—might differ from how much they rise once various random shocks wash out, i.e. the underlying inflation rate.