Readers (1) (2) asked why there seems to be a trend break (log) of the CPI in 2022M06. My best guess is soaring oil prices.
Figure 1: CPI (blue, left scale), core CPI (beige, left scale) and WTI oil price (bold black, right scale), all in logs, 2022M02=0. Source: BLS, EIA via FRED, and author’s calculations.
While the CPI trend breaks in month 202206, corresponding to the peak in oil prices, the underlying CPI shows no such evidence. The use of a unit root breakout test (Perron, 1997) allows us to identify a trend and an intercept breakout at 2022M04.
Note that there is also a break in the core CPI, although the same test finds a break at 2023M01.
For the world, there is a similar pattern:
Figure 2: US CPI (bold black), rest of the world (beige), rest of advanced economies (green), emerging markets (red), all seasonally adjusted, in logs 2021M01=0. Source: BLS, DGEI of the Dallas Fedand the author’s calculations.
