The way inflation is measured changes to suit our economic environment
Impressive account that emphasizes the need to be cautious. When it comes to the hot topic of housing, that the US gives a weight of 24% in the index based on an imputed rent, that seems to me to be a better way to go in gauging the costs that consumers have to meet, so a better way to monitor the impact on living standards that might be of interest to Treasury, the RBA and wage setting tribunals.
I'm looking forward to the book.
You could make the same argument for GDP or even cross-country comparisons of GDP. It is a very nuanced piece. Thank you for writing it!
Thanks for setting out this history.
Good write up and much is applicable to the US. An important difference is that the Fed's target for inflation is the Price of Consumer Expenditures, not the US Consumer Price Index. Which is good except that our Treasury Inflation Protected Security inflation expectation measure IS defined on the CPI so a 2% increase in the CPI would probably be undershooting the PCE target by about 0.3 percentage points.