3 ms·
> Your rationale sounds very much like "we shouldn't include it because the inflation rate would be higher". What is the CPI actually used for? To set various
by ethbr1 3y ago
> Your rationale sounds very much like "we shouldn't include it because the inflation rate would be higher".
What is the CPI actually used for?
To set various levers at the central bank level to manage inflation and keep the economy humming along.
One of those levers is... the Fed funds rate... which in turn influences most other interest rates.
So you'd be incorporating interest into the measurement used to set interest.
- JumpCrisscross 3y ago> What is the CPI actually used for? Technically, they pay closer attention to PCE.
- mitthrowaway2 3y agoCPI is used for other things too, including contract negotiations and standard of living comparisons. Anyway, recursive sums like that are nothing unusual; as long as the sum converges it's not a problem. Any negative feedback amplifier does the same thing.
- deleted 3y ago[deleted]