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

CPI 2016-02-19

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

Stcky CPI

The above chart from the Atlanta Fed Sticky CPI Report.

Yield Curve

Yield Curve 2016-02-19

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

fedwatch 2016-02-19

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