This is question #30 in the Astral Codex Ten 2023 Prediction Contest. The contest rules and full list of questions are available here. Market will resolve according to Scott Alexander’s judgment, as given through future posts on Astral Codex Ten.
Come o people--this is mispriced. CPI has averaged below a 2% annual rate over the last 6 months; month-over-month numbers will need to rise from the recent average of ~0.15% to >0.3% for all of 2023 to hit 4%. The year-over-year inflation number that is more prominently reported takes trailing 12 months and obscures the more recent trend indicating a drastic moderation.
@AlQuinn But also:
Starting with January 2023 data, the BLS plans to update weights annually for the Consumer Price Index based on a single calendar year of data, using consumer expenditure data from 2021. This reflects a change from prior practice of updating weights biennially using two years of expenditure data.
And
@MattCWilson Do you predict the change in weighting will be that significant in terms of the reported number? Looks like a relatively minor change and I don't expect year-to-year change in how category weightings are set to be decisive for this question, though that is an additional variable to consider (wonder if they will report 2023 Jan in comparison to legacy method to see if any big differences).
Second, I already pointed out the issue with the December 2022 data: that is full year and the vast majority of that inflation happened in the first half:
2022 1st half annualized inflation: 10.9%
2022 2nd half annualized inflation: 1.8%
2022 full year inflation: 6.4%
@AlQuinn I’m not sure. 2021 was the middle of the pandemic - if the last weights were using 2019-2020 (or 2018-2019? I’m not sure when they last reweighted) that is a very different economic condition to baseline from.
Just observing reasons that might explain the reasoning.
