Harvard economists develop new inflation measure accounting for interest rates, helping explain disconnect between consumer sentiment and economic data

Harvard economists developed a new inflation measure that includes interest rates to explain "vibecession" disconnect between sentiment and economic data.

Their measure that accounts for rising borrowing costs closed over 70% of the gap between predicted and actual consumer sentiment.

Standard CPI inflation doesn't capture how much more expensive debt is from higher interest rates.

Evidence that interest rates impacted sentiment it rose recently along with decline in mortgage rates.

If rates are cut, it may improve how Americans feel about the economy and buoy real economy and perceptions.