Indeed – inflation expectations themselves are a pretty biased measure as well. It isn’t clear exactly what prices each individual is thinking about when answering the question.

That is why I prefer to look at the trend in quality adjusted wage growth – as this gives us some idea of what pay rise firms and employees are willing to give independent of productivity. Over time this pay increase will be real inflation expectations.

However, I don’t know where that cheeky data sits in the US – as people always say real wage growth has been weak my suspicion is that it would have run along with measured inflation (or possibly even weaker …)

CPI is still useful for giving us an idea of the relative price of an asset – as the ultimate goal of the asset it to create a stream of revenue for consumption.

But when asked about inflation expectations, are people only responding to consumer goods and services and ignoring real estate?
As in:

“The rising house prices were a concern as household’s confused them for real wealth – and spent accordingly.  As a result, household’s consumed at an unsustainable level.  Now that they have realised that they want to, and need to, pull back.”