Economists always debate using the core CPI or the headline CPI. Headline includes gas and energy, considered too volatile by some bankers. My point on this is here, and Justin gets my point.
Bankers do not like making long term deals based on short term inflation volatility. But short term bankers had better pay attention. Consider Choppy Oil, a previous post of mine. Oil right now is choppy in a spectral band with a peak of 6 months, something is cycling, probably Congress and their stimulating. From a pure hydraulic macro perspective, the trade here is to buy six month oil futures and try to smooth out the chop over one year intervals. So, trade with the chop frequency, but target the one year and borrow at the one year rate for funds. I say target the period twice the choppy frequency because maximum effect is there (Nyquist again)
But, from a bankers point of view, a noticeable spectral peak in the CPI series means you are off equilibrium at the corresponding term. The choppy oil spectrum tells me that one year rates are going up soon.
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