The CPI rose 0% today with core-CPI up 0.3%. Core CPI is a silly construct that excludes food and energy, supposedly because food and energy are volatile.
With core-CPI up, Bloomberg Econoday fantasizes the Fed might hike in March.
CPI Month-Over-Month and Year-Over-Year
Fantasyland Econoday Thoughts on March Rate Hike
Consumer prices are on the rise and the Fed’s December rate hike doesn’t look misplaced at all. Core prices jumped 0.3 percent in January which beats Econoday’s top-end estimate with the year-on-year rate up 1 tenth to plus 2.2 percent. The Bureau of Labor Statistics notes a “lack of declines” across core readings. When including energy, however, and also food, total prices were unchanged in the month though the year-on-year rate literally surged, up 7 tenths to plus 1.4 percent.
Services are the center of the economy’s strength and prices are rising, led by medical care which jumped 0.5 percent in the month for a year-on-year plus 3.0 percent. The subcomponent for prescription drugs also rose 0.5 percent. Shelter rose 0.3 percent in the month as did rent while owner’s equivalent rent rose 0.2 percent. Away-from-home prices jumped 2.0 percent.
Goods prices are mixed with apparel jumping 0.6 percent in the month but with energy down 2.8 percent and gasoline down 4.8 percent. Food prices were unchanged. The only core reading showing any contraction was home furnishings and only at minus 0.1 percent. New vehicles rose 0.3 percent with used vehicles up 0.1 percent. Airfares were especially hot, up 1.2 percent in the month.
These results may prove to be a game changer for the FOMC, pointing to pressure for next week’s PCE price data and perhaps reviving chances for a March FOMC rate hike.
Sticky and Non-Sticky 12-Month CPIs
The above chart from the Atlanta Fed Sticky CPI Report.
Yield Curve
In contrast to Econoday comments, yields fell today. Note: The above chart is from yesterday. Stockcharts is unusually slow in posting today’s closing numbers, but a quick check elsewhere does show yields are down.
- 3-Month: 0.29%
- 6-Month: 0.44%
- 1-Year: 0.50%
- 2-Year: 0.74%
- 5-Year: 1.22%
- 10-Year: 1.74%
- 30-Year: 2.60%
March Rate Hike Odds Collapse
To round out the silliness of Econoday comments, please note the odds of a March rate hike fell from 14.9% yesterday to 2.1% today.
Mike “Mish” Shedlock
A good part of me wants to see a rate increase in March so to see if indeed there is more to this economy than its “Potemkin Village” facade, still I worry if the discovery is worth the risk?
ST LOUIS FED RES SEEMS TO THINK THE CORE CPI SHOULD BE TOSSED OUT.
I WONDER IF THE FOLKS IN WASHINGTON HAVE ANY IDEA WHAT THE REAL WORLD IS LIKE. THEY MAY BE SURROUNDED BY SO MANY ASS-LICKS THAT THEY MIGHT BE TRULY SURPRISED IF THEY WAKE UP ONE MORNING WITH THEIR MILLIONS OF STOLEN MONEY NOW WORTHLESS. YOU KNOW, TOLIET PAPER.
Search Results
[PDF]Measuring Inflation: The Core is Rotten – St. Louis Fed
https://research.stlouisfed.org/publications/review/11/07/bullard.pdf
by J Bullard – 2011 – Cited by 16 – Related articles
James Bullard is president and CEO of the Federal Reserve Bank of St. … PCE Chain Price Index Inflation Measures: Headline and Core …. ratio, but the food component often does not have …. is that some prices are considered “sticky” (in a.
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