Part 3/8:
To break down CPI's significance, Nash explains the basic methodology—tracking a basket of goods and services to measure changes in prices month-over-month and year-over-year. A quick increase would typically necessitate intervention from the Federal Reserve (the Fed) to slow the economy and curb inflation, while slower increases could allow for economic acceleration.
The Fed's decision-making has been under scrutiny, especially since they dramatically raised interest rates from 0% to 5.25% over a relatively short period in 2022. Recent discussions suggest a pivot where the Fed might enter a cutting cycle, considering a reduction towards a neutral rate around 3%.