> Why would that be a measure of "monetary inflation”
The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts.
We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.
The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts.
We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.