Underlying Inflation Gauge (UIG)

Introduced in 2017 by the New York Federal Reserve with data going back to 1995, the Underlying Inflation Gauge (UIG) was meant to complement other measures of inflation like CPI and PCE. UIG differs in the way it’s calculated – it derives trend inflation from a large dataset that uses more than just price variables (Core CPI only uses price components). The UIG has also been a more accurate forecasting tool than other inflation measures.

The UIG calculates two series – the “prices only” measure and the “full set”. The “full set” includes additional macroeconomic and financial factors that the “prices only” set does not.

The latest UIG “full set” for April came in at 4.0%, down 0.3 from the March figure. The “prices only” measure for March came in at 3.4%, also down from March. The decreases are similar to the CPI figures released this morning: Headline and Core CPI for April are at 4.9% and 5.5%, respectively. Both Headline and Core CPI were down 0.1 percentage point from the previous month. Although falling, both Headline and Core CPI remain at their highest levels since the UIG data set began.