Inflation you can’t believe in

Daily update

China’s September inflation data was not especially exciting. Food prices kept the consumer price inflation figures moderate (food is nearly 30% of China’s consumer price basket). China is not a noted food exporter, so this has little global bearing. China’s consumers are not responding to low inflation with much enthusiasm.
US consumer price data has become less precise in recent years. Oil costs are being passed on, raising both headline and core inflation rates. Profit-led inflation and wage pressures remain largely absent (apart perhaps from airfares). Such inflation requires little or no central bank response. New York Federal Reserve President Williams signaled no desire to raise rates in 2027, suggesting little concern about second-round inflation risks.
Politically, most US households do not believe the inflation numbers (if survey evidence is believable). Frequency bias and loss aversion distort inflation perceptions, and inflation perceptions drive the affordability crisis. Price levels also matter at least as much as the latest price change. Details like beef prices (high, and high frequency purchases) and electricity (a politically charged subject) will matter.
Central bankers are jostling for the microphone at the IMF’s gathering in Thailand. The Bank of England’s Bailey and the European Central Bank’s Lagarde are amongst those struggling to be heard.