The U.S. government reported last week that inflation measured by the consumer price index rose 6.5% over the last 12 months. Meanwhile, inflation measured by the personal consumption expenditure price index increased by 5.5% year-on-year in November. Both of those figures are well over the Federal Reserve’s 2% target for inflation.

But what if we said that it’s actually not as bad as we think? In fact, inflation is practically back to where we want it to be. Hard to believe, right?

According to Alan S. Blinder, an economics professor at Princeton University and a former vice chair of the Federal Reserve Board, we’re missing the trees for the forest. The most commonly used inflation measures look at 12-month averages or year-over-year comparisons. However, if we focus on just the last few months, it’s a different picture.

Blinder joined “Marketplace’s” Kai Ryssdal to talk about the disconnect between current data and the Fed’s actions. An edited transcript of their conversation is below.

Kai Ryssdal: For those not versed in the statistical arts, help us understand how you’re saying that inflation is down almost to where the Fed wants it to be.

Alan Blinder: Yeah, so the Fed’s target is 2%. But — now this is getting deep in the weeds, I’m sorry — they post that target for not the consumer price index, but for another index called the personal consumption expenditures deflator. That’s a mouthful. The CPI, the consumer price index, runs higher, normally about a half a percent higher. But lately, there’s been a much bigger gap. So an obvious translation is to a 2.5% CPI target. And if you look at the last six months, inflation is running below that, actually. It’s more like 2%.

Ryssdal: OK, is this all the Fed’s handiwork? Can [Chair] Jay Powell and the gang do a victory lap now and depart the field?

Blinder: No. You know, Jay Powell is a friend of mine, I’d love to give him full credit for this. But I think most of the credit goes to two things: First is falling oil prices. Everyone will remember they were rising early in this inflation and causing tremendous angst. And then finally, finally, finally, a virtual end to the supply constrictions, restrictions, blockages, limits, etc. Every measure that you can find is way down and almost back to pre-pandemic levels after having soared during the worst of this. All of those supply constrictions were driving inflation higher, and they’re pretty much gone now.

Ryssdal: Energy’s obviously notoriously volatile. Prices may go back up. You’re not worried about the supply chain coming back to bite us again?

Blinder: I think that’s very, very unlikely. You know, if you want something to worry about, there are worrywarts that are always looking for things to worry about. You could worry about what may happen in China as COVID-19 ravages the country; that could severely limit Chinese exports. I doubt that. It could happen a little. I mean, when I say I doubt it, I doubt that it’ll happen on a grand scale.

Ryssdal: Right. So look, we’re all real happy that inflation is coming down. But let me ask you about what the Fed is doing. Because as Chair Powell likes to say all the time, monetary policy works with “a long and variable lag.” He’s quoting, of course, Milton Friedman. Because the Fed is now promising to keep rates elevated for basically as long as they take, do you suppose it’s possible that monetary policy — that is the Fed’s interest rate policy — is acting faster than it used to?

Blinder: I think that’s not only possible, but likely. But it’s not something we should exaggerate. The shortening of this famous long and variable lag, I believe, is largely coming from the much faster reaction of the markets to the Fed. In the bad old days, the Fed was secretive; markets didn’t know what it was up to. Now, the Fed tells markets. It tells everybody. It practically hits them over the head with the news. And as a result of that, markets sometimes move the long end of the yield curve faster than the Fed moves the short end. But you’re measuring that time-saving — if you call it that — in months, not in years.

Ryssdal: But look, millions people are going to hear this interview and they’re gonna say, “Alan Blinder said inflation to 2%, yet Jay Powell and all the rest of them say they’re going to keep interest rates really high. And that’s costing me money. What the heck is going on?” How bad is the Fed’s messaging problem?

Blinder: The Fed is in a very ticklish position. They can’t be as frank as I just was with you. I could say anything, and I don’t move markets. If Jay Powell sneezes, he moves markets. It is too early to declare victory over inflation, it’s only six months. And that’s what Jay Powell or any of the Fed people would say if you had them on the radio. But I say it’s six months. Six months is not a week, six months is not two months. This is not a trivial length of time. I think it might take a year of this or, say, another six months to convince the Fed to declare victory. They’re not about to declare victory yet.