Hansen argues the CPI should include food prices

Steve Hansen at “Global Economic Intersection” presents a compelling case arguing that food prices should be included measures of core inflation (the Consumer Price Index, or CPI). Hansen simply looks at the history of the core CPI excluding food and energy versus CPI for food only versus CPI for energy only and comes to the easy conclusion that “…there is strong correlation between food price increases and the overall Consumer Price Index (CPI)…with only rare periods of exception.”

His closing remarks on the topic are a vivid reminder of one of the many reasons I care so much about “Inflation Watch”:

“Inflation is a very personal enemy for most Americans who live paycheck to paycheck. When your paycheck does not get larger, and the prices go up – you must cut something out of your life. And when Fed Chairman Bernanke says inflation is low – you know that he is addressing the segment of the population which does not live paycheck to paycheck.”

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