There is new CPI data out today, so I've updated the lag model. It looks like it's not doing too well. There's the spike in January/February, which might be transient. It's within 3 sigma (0.03%, or one month in 30 years), but it occurs in both PCE and CPI data which makes it more like 4.5 sigma (one month in 12,000 years -- since the last ice age). That's troubling, but another problem is the IE lag model is consistently under-estimating the last 8 measurements of CPI inflation (there's a bias), which is a 0.4% probability event (about 3 sigma) on its own.
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New CPI data, and an IE model gets rejected
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There is new CPI data out today, so I've updated the lag model. It looks like it's not doing too well. There's the spike in January/February, which might be transient. It's within 3 sigma (0.03%, or one month in 30 years), but it occurs in both PCE and CPI data which makes it more like 4.5 sigma (one month in 12,000 years -- since the last ice age). That's troubling, but another problem is the IE lag model is consistently under-estimating the last 8 measurements of CPI inflation (there's a bias), which is a 0.4% probability event (about 3 sigma) on its own.