By paul gomme and peter rupert
The Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) for all items rose 0.5% over the month or 5.75% on an annualized basis. This is the largest increase since August of 2023. The year-over-year increase was 3.00%. Our preferred trend measure rose 4.12% on an annualized basis. As the graph below shows, all of the measures have been inching up over the past few months.
Removing food and energy from the index, the core measure, increased 5.49%, the highest reading since April of 2023. The year-over-year number increased 3.29% and the trend measure was up 3.85%.
No matter how one slices it, the inflation numbers are not moving in the right direction. The rise in prices was broad-based, the only major category that decreased over the month was apparel. Later this month, the FOMC’s preferred measure of inflation, core PCE, will be released. There’s a high correlation between CPI and PCE inflation, and it seems unlikely that this measure of inflation will near the committee’s 2% target.
Fed Chair Powell began his testimony to the House Financial Services Committee this morning and will likely have a tough time given the broad based spike in prices. Needless to say, this does not bode well for an easing of interest rates in the near term.
