Prices
35cool
0.56 percentage points below its 10-year average | Data for Sep 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
US consumer prices excluding food and energy, compared with the same month a year earlier. The core PCE price index favored by the Fed is also shown.
Food and energy prices swing widely, so core inflation shows the underlying trend more clearly.
No official data were published for Oct 2025 (US government shutdown); we filled the gap by linear interpolation between the months before and after.
Excludes food and energy.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also cool
| Components | Percentile | Level | Data month |
|---|---|---|---|
| Core PCE prices | 63 | warm | Aug 2026 |
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every cool month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
Bars: median cumulative changeEarlier months with Core inflation cool, excluding the current period (175)All months (587)
Median of the deepest drop below the starting month within the next 5 years: −1.8% for months with Core inflation cool; −3.7% for all months.
The cool months come from a small number of market episodes (6), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
| Median position | Back to neutral (40–60) | Still no warmer than cool | |
|---|---|---|---|
| 1 yr later | 34cool | 22% | 67% |
| 3 yr later | 38cool | 34% | 55% |
| 5 yr later | 36cool | 34% | 58% |
Has hot or cold lined up with later returns?
1977–2021: average yearly change in US stocks over the next 5 years
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
What it is linked to
Core inflationtoFed funds rateCommon explanation: Cause · same direction
The Fed’s 2% target is set for overall prices, but it uses core inflation, which excludes food and energy, to judge the trend
This issue: Core inflation at 35 (cool), Fed funds rate at 72 (warm) — Core inflation below normal, Fed funds rate above normal, not in line with the common explanation.
Weak or inconsistentAgreement +0.65 · in step in 31 of 44 5-year periods
WagestoCore inflationCommon explanation: Knock-on · same direction
Services rely mostly on labor, so wages push up service prices
This issue: Wages at 22 (cool), Core inflation at 35 (cool) — both below normal, in line with the common explanation.
Weak or inconsistentAgreement +0.46 · in step in 22 of 37 5-year periods
Values
Data and sources