While economists focus on the firmer 'core' inflation, financial markets that trade inflation (like TIPS and swaps) price off the 'headline' number. This headline figure has consistently surprised to the downside for 14 of the last 18 months, creating a bearish dynamic for inflation-linked assets.

After accounting for measurement quirks in both CPI and PCE, the podcast's economists converge on an estimate for "true" underlying inflation around 2.7-2.8%. This consensus view suggests that while official measures are noisy, the underlying trend is still meaningfully above the Fed's 2% target.

The gap between Core PCE (3.3%) and Core CPI (2.5%) inflation is driven by how each index weighs shelter and measures financial services. CPI gives more weight to disinflating shelter, while PCE is inflated by a stock market-linked measure for financial services.

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.

Upcoming technical changes by the Bureau of Economic Analysis will mechanically lower reported core PCE inflation by 0.2 to 0.3 percentage points. This is primarily due to a new methodology for measuring financial services, creating an artificial cooling in the data that the Fed is likely to look through.

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.

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.

The Bureau of Economic Analysis will soon change how it calculates financial services prices for the PCE deflator. It's moving from a stock market-based measure to one based on wages, a change expected to reduce year-over-year Core PCE by 0.1-0.2 percentage points.

The surprising 0% change in June's core CPI was driven by noisy, one-off drops in volatile categories like hotel prices (-3%), apparel, and medical care. This cluster of declines created an unusually low reading that doesn't reflect the underlying inflation trend.