The Bureau of Labor Statistics’ September CPI release reports a marked increase in month-over-month inflation from 0.89% to 4.86% on an annualized basis for the overall CPI, and from 2.62% to 3.53% for core CPI. There was little change in the year-over-year inflation measures: From 3.30% to 3.35% for overall CPI, and a modest decline from 4.47% to 4.45% for core CPI. As we have discussed in previous posts, our trend measure of inflation takes a middle ground between the highly volatile month-over-month measures and the extremely sluggish year-over-year measures. Our measure of trend inflation rose from 1.92% to 2.90% for overall CPI, and a more modest increase, from 2.17% to 2.62%, for core CPI.
The 16% trimmed mean CPI inflation rate was little changed: it fell from 2.71% in July to 2.67% in August. As mentioned in an earlier post on the CPI and trimmed mean, there is a lot of noise in monthly price movements. The “core” notion, removing food and energy, is a now often used measure. As can be seen above, the headline number moved up substantially and the core measure by a little less. While the core removes food and energy alone, the price movements across all areas can also be volatile. The components graph below shows a few different categories, with medical care prices falling substantially. The 16% trimmed mean removes the top and bottom 8% of the price changes.
By almost any measure, the price numbers remain well above the Fed’s 2% target, putting more likelihood on rising interest rates in the near future.