Post-pandemic, companies have shifted from setting prices on a fixed schedule to "state-dependent pricing." They now adjust prices more frequently in direct response to rising costs, causing inflation to pass through to consumers more quickly and persistently.

A surprising spike in cell phone service prices, likely due to a new BLS measurement methodology, added a tenth to the core CPI reading. This single, potentially anomalous data point was a key driver for J.P. Morgan's economics team to change its forecast to include two Fed rate hikes.

Trimmed-mean inflation measures, which filter out extreme price changes, are flawed because they ignore the "canaries in the coal mine." This approach would have missed the initial 2021 inflation surge, which began in a narrow set of goods and later spread, creating a dangerously dovish and incorrect view.

An analysis of price changes shows that sectors with heavy government subsidies and regulation (healthcare, college, housing) experience rampant inflation. In contrast, highly competitive, less-regulated technology sectors (computers, cell phones) have seen significant price decreases, suggesting government intervention is a primary driver of inflation.

Contrary to the recent narrative of services-driven inflation, data shows core goods prices are firming due to rising technology costs and supply chain stress. Meanwhile, key services components like shelter and medical care have been running milder, signaling a potential shift in underlying inflation drivers.

Following a summer dip, core goods inflation re-accelerated to a 2.2% three-month annualized rate. Analysts believe this pressure may persist into early 2027, propelled by technology hardware price pass-throughs, rising transportation diesel costs, and elevated input prices in manufacturing surveys.

A massive, non-seasonally adjusted 6% monthly jump in the "wireless phone service" category was a primary reason core inflation beat forecasts. This volatility is a result of recent BLS methodological changes, suggesting the spike may not reflect actual price hikes by carriers.

A measure of "market-based core PCE services ex-housing" inflation is accelerating. This niche metric, which strips out imputed prices and volatile sectors, suggests that core economic activity is generating persistent inflation, challenging narratives focused solely on energy shocks or trade wars.

The August Core CPI report appeared hotter than consensus, but this was largely due to a methodology change in the telecommunication services category that added volatility. Excluding this single category's outsized 10 basis point contribution would have brought the core reading below consensus, suggesting a more benign underlying inflation trend.