U.S. inflation has started to ease, Lisa Cook, a member of the Federal Reserve Board of Governors, said in a keynote address April 21 at the Carroll Round annual International Economics Conference at Georgetown University, according to a news release.
Although economic data is typically backward-looking, Cook shared several indicators she uses to try to forecast inflation.
"For monetary policy, the foremost questions currently are about the inflation process," she said. "The pandemic-related economic shutdown created rapid shifts in demand, which continued through the reopening process and reflected people's wants and needs during that time...As energy prices have moderated and supply disruptions have eased, inflation has followed suit and started to abate."
The Bureau of Labor Statistics released the latest Consumer Price Index (CPI) summary on April 12, which found that the CPI for All Urban Consumers (CPI-U) increased by 0.1% in March after increasing by 0.4% in February. Over the last year, the rate of inflation stood at 5%. Categories with the highest inflation rates over the last year include food (8.5%), electricity (10.2%), shelter (8.2%) and transportation services (13.9%). Inflation in other categories has decreased over the last year, including gasoline (-17.4%), fuel oil (-14.2%) and used vehicles (-11.2%).
Cook discussed the latest CPI summary in her address, saying that the 5% 12-month inflation rate represents a decrease from last June's peak of 9%. She said the biggest question that remains is how quickly inflation will drop to the Fed's target of 2%, and because much of the decline so far has been driven by decreasing energy prices, which are volatile, she warned that the path to the 2% target could be "long, uneven and bumpy."
Cook said that in order to get "a sense of where inflation is going," she utilizes several data sources. To forecast the prices of core goods, she examines measures of supply chain disruptions. To forecast housing services prices, Cook analyzes rent increases on new leases on sources such as Zillow and Apartments.com.
"One encouraging development is that last week's CPI data showed a significant slowing in housing services inflation. This development likely reflects moderation in demand and has been helped by the additional supply of multifamily housing that is being completed. More places available to lease should contribute to easing rental prices," Cook said.
Cook was appointed to the Board of Governors of the Federal Reserve System in May 2022, prior to which she worked as a professor of economics and international relations at Michigan State University, a research associate at the National Bureau of Economic Research and a faculty member of Harvard University's Kennedy School of Government, according to her Federal Reserve biography.