> By that logic we should use car payments from cars bought 5 years ago instead of car prices today. Why doesn't CPI do this?

>If I buy 100lbs of canned goods from Costco 10 years ago, we should use that pricing instead of current price of canned goods too.

Well wikipedia says it's something that economists are "torn" on[1], so maybe they actually should be doing it for consistency reasons! Searching around it looks like the bank of canada[2] and the imf[3] considered doing just that.

Also, apparently the whole reason the adjustment was put in place was because academics complained that the CPI was too biased in the upwards direction[4]

>We should use mortgage payments from house bought 10 years ago, not estimates of current rents.

1. Given that mortgage payments are fixed and housing prices have went up in the past decade, this approach would probably underestimate compared to OER

2. it still doesn't solve the issue that houses (or more specifically land), is an asset, not something you consume (the "C" in CPI).

>If you are arguing that using backwards looking rent levels make sense, surely you must agree with these changes too, which are 100% logically consistent with that viewpoint? Otherwise you are just being intellectually dishonest

Bold of you to assume that I'd disagree with it ;)

>To say that CPI reflects prices paid over market rates is not even accurate because we don't measure fixed costs for most goods in the CPI, only current pricing. Rent is the only exception, where methodology is not aligned with current market pricing.

Of the other goods in the CPI, how much % are durable goods? Of those, how long do people typically own those goods for? For instance, I agree that in in theory it's worth factoring this in for smartphones, but they make up such a small part of people's spending, and the time span is so limited (~2-3 years?) that it's not worth factoring it. This is as opposed to a house that costs hundreds of thousands of dollars, and people own for decades. In other words, maybe the inconsistency is there because they only bothered to adjust the biggest factor?

>The Fed uses CPI as their primary tool for gauging inflation yes, among many other factors such as labor market tightness and so on. Core PCE specifically. Their entire inflation target is built around this as a metric, if you weren't aware.

No, you're missing the fact that they have experts interpreting the metrics. They're not just applying some rule like "if inflation > 3 then raise interest rates". That's why there was the whole "transitory inflation" thing a few months ago even though inflation was way above the target. Given that, unless you think the experts there are totally incompetent and don't have this factored in, I don't see how it's really an issue. Presumably it's baked into their models already.

>Clearly from a pure statistical sense, using backwards looking data to assist with forecasting is statistical nonsense.

I agree that the adjustments are basically a smoothing function that make the CPI more "backwards", but removing it doesn't magically make the CPI not backwards looking. It's backward looking by definition. It's recording chicken prices collected last month. If you want forecasts the CPI is not it. You'll have to get them yourself (ie. experts and/or markets). See also "transitory inflation" from last paragraph.

>But think whatever you like. I can't respect your view unless you agree that we should use lagging factors across the board to make measurement methodology consistent. Otherwise what is even driving your view? Bias?

>What you're describing is a consumer expense index, not what I would think of as a consumer price index. And looking at locked in expenses from the past is largely useless from a monetary policy perspective.

I'll have to concede that CPI literally says "price", so therefore technically speaking you're right that it should consists of price first and foremost. That said, you failed to answer my question from last comment. If you had a commodity price index consists of a random assortment of future prices (of varying lengths) plus spot prices, is that something that people want? It seems at least somewhat reasonable to adjust the prices from the index so that they're all for the same time period, even if that did mean it wasn't following the "real" prices.

[1] https://en.wikipedia.org/wiki/Consumer_price_index#Owner-occ...

[2] https://www.bankofcanada.ca/wp-content/uploads/2015/11/boc-r...

[3] https://www.imf.org/~/media/Files/Data/CPI/chapter-2-concept... search for "durables"

[4] https://www.bls.gov/opub/btn/volume-1/pdf/consumer-price-ind...