The difference in understanding inflation between the Federal Reserve and the average person essentially stems from different measurement standards, time frames, and real concerns. To help you quickly grasp the core, let's take a look at the differences in perspectives between the Federal Reserve and the average person.

Federal Reserve's Perspective (Macro and Future):

1. Rate of price change (inflation rate), focusing on its future trends

2. Short-term year-on-year/month-on-month changes (e.g., this month compared to last month, this month compared to last year), with a goal of long-term stability at 2%.

3. Policy objective: Manage expectations and achieve a soft landing. Allow for temporary overshooting of inflation, focusing on the trade-off between employment and inflation.

4. Economic understanding: Views moderate inflation as a natural result of healthy economic growth.

Average Person's Perspective (Micro and Present):

1. Absolute price levels, especially of essential goods like food, energy, and housing

2. Long-term comparisons (often compared to 3-5 years ago or pre-pandemic), with a short memory for price declines but a deep sense of price increases

3. Expectation for prices to fall back. It is difficult to understand why prices do not return to previous levels after the inflation rate drops, and they do not accept that controlling inflation must come at the cost of unemployment.

4. Generally view inflation as purely a negative factor, stemming from excessive government spending or corporate greed.

The deeper logic behind the differences:

1. The race between wages and prices: The theoretical foundation of the Federal Reserve is that even if prices rise, as long as wage growth can keep up faster, the public's real purchasing power will not be harmed and may even improve. However, the reality is that, although recent data shows that wage growth has generally surpassed inflation, the feelings of different groups vary greatly.

2. Professional trade-offs and personal experiences: As policymakers, the Federal Reserve must accept the "trade-offs" in controlling inflation, such as how raising interest rates to curb demand may slow economic growth and increase unemployment. This is a professional judgment that is part of their responsibility. However, the general public, starting from their own life experiences, finds it hard to accept this logic of "choosing the lesser of two evils," believing that controlling inflation should not come at the expense of employment and economic vitality.

In summary:

The Federal Reserve focuses more on the dynamic balance and future trends of the macroeconomy, while the average person is more concerned with the specific levels of personal finances and living costs. This difference in perspective leads both sides to have completely different feelings even when faced with the same set of data.