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on November 23, 2008 01:28 PM
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When we pay more Stock & Commodity Trading for food and energy, it may no longer represent mere noise but might be providing signals of longer-term, structural inflationary pressures.
In these circumstances, a trimmed mean approach has merit. A trimmed mean approach will still trim out volatile noisy numbers, which might include food or energy in any given measurement period. But it will retain, and thus allow us to focus on, the signals sent to help determine the true course of inflation.
Now, before you rush out from dinner saying that Richard Fisher weighed in against Mr. Peter Costello on behalf of the Reserve Bank, let me point out that trimmed meanswhile better than the standard ex-food, ex-energy core measurementsare imperfect things. A few items that have important implications for our living standardscomputers being the prime exampleexperience large, technology-driven price declines month in and month out and hence get trimmed out. The Dallas Fed tries to correct Penny Stock Secrets for this potential source of bias through our choice of trimming proportions, but we realize that correction is imperfect.
The Innovative Traveler
Last update : November 23, 2008 01:28 PM
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