Instantaneous Inflation

Abstract

Current practice to measure inflation for monetary policy uses the average annual inflation rate.When inflation changes fast, whether increasing or decreasing, the annual average rate is biasedtowards data from too far in the past and conveys the true price level with six months delay. Ipropose to use instantaneous inflation as a more adequate measure of the price change. The measuretrades off noise in the data with the precision of the instantaneous price change. Using the latestinflation numbers up to June 2023, it shows that instantaneous inflation in the US is back to 2.5%,and to 2.6% in the Eurozone, indicating the high inflation period has come to an end. Also US coreinflation is declining, currently at 4%. In contrast, inflation remains high and shows no signs ofdecline in the UK, Japan and Australia.

Keywords: Instantaneous Inflation. Core Inflation. Kernel.