Fun with the Fed: Inflation is low, but the cost of living is up

From July to August, the “Core Consumer Price Index” did not move. That means zero inflation, if you use the measure of inflation the Federal Reserve uses when setting monetary policy. But core CPI omits volatile prices like food and energy. If you have a family, you’re probably pretty aware that food and utility bills are a big factor.

The result: The inflation measure that guides Fed decisionmaking has little resemblance to the inflation measure that guides family budgetmaking.

For instance, look the numbers Business Insider outlined in red in the image above. Those are year-over-year price changes. They add up to a low 1.7 percent of inflation. But when I go through these numbers as a co-head of household, I see higher inflation.

Food at home is up 2.9 percent. Our grocery bill is about tied with our mortgage for our highest expense. Also, the types of groceries we spend the most on are up even more: Meat prices are up 8.8 percent.

While nonalcoholic beverages and beverage materials are down year-to-year, basically the only non-alcoholic beverages we buy are milk. We buy lots of milk. Milk for cereal, milk for drinking at meals, milk for mixing with scrambled eggs, milk for chocolate milk. … Milk is up 21 percent from last year. Yes. Twenty-one percent.

What do the grown-ups in our house drink? Water, whiskey, beer, and coffee. Coffee is up more than 50 percent from last year.

Energy is supposedly getting cheaper. Not for us, according to CPI data. Electricity is up 4.1 percent and gas bills are up 5.8 percent.

Medical services are up only 1.9 percent, but that’s still higher than the 1.7 CPI.

It’s not all up. Gasoline is down 2.8 percent, clothing is flat.

The net result is that life has gotten considerably more expensive for me since this time last year. I’m not saying this ought to guide our monetary policy. I’m just saying that core CPI doesn’t track the cost of living.

“Consumer Prices Are Ice Cold,”