One afternoon in late February, an employee at the Bureau of Labor Statistics sent an email about an obscure detail in the way the government calculates inflation — and set off an unlikely firestorm.

Economists on Wall Street had spent two weeks puzzling over an unexpected jump in housing costs in the Consumer Price Index. Several had contacted the Bureau of Labor Statistics, which produces the numbers, to inquire. Now, an economist inside the bureau thought he had solved the mystery.

In an email addressed to “Super Users,” the economist explained a technical change in the calculation of the housing figures. Then, departing from the bureaucratic language typically used by statistical agencies, he added, “All of you searching for the source of the divergence have found it.”

To the inflation obsessives who received the email — and other forecasters who quickly heard about it — the implication was clear: The pop in housing prices in January might have been not a fluke but rather a result of a shift in methodology that could keep inflation elevated longer than economists and Federal Reserve officials had expected. That could, in turn, make the Fed more cautious about cutting interest rates.

“I nearly fell off my chair when I saw that,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, a forecasting firm.

Huge swaths of Wall Street trade securities are tied to inflation or rates. But the universe of people receiving the email was tiny — about 50 people, the Bureau of Labor Statistics later said.


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