[mattnewton]

Inflation is a tricky measure to understand intuitively because, as a rate of change it can compound faster than you think, and, as measured it is basically always a lagging number. 9-10% inflation compounding over 3-4 years is going to be nearly 50% increases in prices, and 100% in something like 7 I think.

Official food inflation numbers put out by the US gov after Covid rocketed up to (a very unflattering) over 11% by mid 2022, and have only very recently gone back down to reasonable numbers, meaning you saw large increases in food prices that have only recently stopped increasing. (I don’t think the current administration would want to put out those numbers before the midterms if they were cooking the books).

[chii]

They "cook" it by substitution of their basket of items - swapping steak for mince. It makes sense on the one hand, because it's actually what people do in real life, when things get expensive, they substitute. But the CPI measure doing the same means the quality of the basket dropped?

[roenxi]

The situation is complex, but I suspect that is the mechanism that anchors inflation to wage inflation rather than monetary inflation. Prices are the signal for when something should be consumed less - so anything with a price rising faster than wage inflation tends to be downweighted and anything with a price rising slower than wage inflation is kept in the basket.

If inflation tended to match to wage inflation then the scheme would be valid, but it doesn't. The newly printed money ends up unequally distributed over the economy, tending to end up with asset owners.

I don't understand why people even pay attention to the CPI. There are direct measures of how much money is being created, we can all just use that rate instead.

[zahlman]

>I don't understand why people even pay attention to the CPI. There are direct measures of how much money is being created, we can all just use that rate instead.

Because it's more obvious how one might try to use CPI to project future expenses.

[Ferret7446]

Correction:

"you saw large increases in food prices that have only recently stopped increasing" as quickly

Inflation is still happening, just not as fast. It doesn't compensate for the fact that prices are still up significantly from what they "should have been".