Um...inflation is still over 3%. That's using bogus government computed CPI. Well in excess of the 2% target.
Since the fed moved to an average inflation target, shouldn't the fed be targeting sub-2%?
Since the fed moved to an average inflation target, shouldn't the fed be targeting sub-2%?
It is true that there are other factors which can drive inflation and rising consumer prices. However, if the recent bout of inflation was caused by supply chain issues, or by food + energy costs rising, then a decline in producer prices would probably slow consumer price inflation.
PPI and CPI historically are loosely correlated, but show no clear lead-follow relationship. PPI seems to swing harder, but not first.
https://www.fisherinvestments.com/en-us/insights/market-comm...
If owner equivalent rent is moving lower (which it was in October), and if prior inflation was caused by supply chain tightness or higher input costs, than a lower PPI could indicate that supply chain tightness has eased, and goods inflation will head lower or stabilize.
It's also worth noting that CPI moves slower than PPI because rents make a pretty big percentage of CPI, and rents move slower than PPI due to how the BLS measures them. It is _a_ leading indicator, but not the _sole_ leading indicator.
However, the PPI can still be a leading indicator of the direction that consumer prices are moving. Here's a recent article from the Federal Reserve on this question:
> However, we also see a considerable positive correlation between lagged values of monthly PPI inflation and the current month's inflation. In particular, the correlations between current monthly PCE inflation and previous months' PPI inflation up to seven months back are all greater than 0.3. This is our first clue that PPI inflation contains information for future changes in the PCE price index.
https://www.richmondfed.org/publications/research/economic_b...