[TaylorPhebillo]

I'm not familiar with this, does this method require that each value is measured independently of the others? Because in that case, you'd want to use monthly inflation rates, rather than monthly estimates of inflation relative to 12 months prior, right?

[kqr]

Ideally, yes. I read too quickly and assumed that these were annualised monthly measurements.

However -- the technique might work anyway: the signal would be smaller, but so should the variation. Yes, one decreases as the square root and the other does not, but over just 12 months that might not make a big difference.

Only backtesting or a more thorough theoretical investigation can tell!

Edit: actually it doesn't have to be very thorough at all, it's a factor of 3. Probably important!