In reference to the following snippet of conversation between myself and sdduuude:
[quote=Rich Toscano]
[quote=sdduuuude]
But saying “the things people need that are scarce will inflate” deserves me giving you a hard time because as soon as you start picking a specific basket of goods instead of a general basket of goods, you are talking about something other than inflation. You are then talking about specific commodity prices.
[/quote]
No, I am talking about a rise in the costs that matter most to people. If the price of everything you need rises by 10%, and the price of everything you could buy but don’t need drops by 10%, that’s not a wash.
Price movements in the things that people need are more important in aggregate. And in the end, when it comes to whether people feel there is inflation or not, I believe they will look at what is happening with the things that they need. I agree that this might not come through in the CPI, and a lot of people pay attention to that, but if the most important things they buy keep going up and up, I suspect that they will start to discount the importance of the CPI over time.[/quote]
It’s short so I’ll just quote the whole thing here:
But in Queens, New York, on Friday, William Dudley was bombarded with questions about food inflation, and his attempt to put rising commodity prices into a broader economic context only made things worse.
“When was the last time, sir, that you went grocery shopping?” one audience member asked.
Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. The Fed looks at core inflation, which strips out volatile food and energy costs, to get a better sense of where inflation may actually be heading.
So, Dudley sought an everyday example of a price that is falling.
“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said referring to Apple Inc’s (AAPL.O) latest handheld tablet computer hitting stories on Friday.
“You have to look at the prices of all things,” he said.
This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment “tone deaf.”
