Core CPI inflation rose during the month of January. But it fell and was relatively muted over longer periods of time--although still some concern the numbers a bit lower due to shutdown-related quirks.
Annual rates:
1 month: 3.3%
6 months: 2.5%
12 months: 2.5%
Here are the full numbers. Sadly no data for October because of shutdown so can't compute 3 month changes.
Core goods inflation was high as the tariffs were kicking in but has basically gone away and I don't think there is much reason to expect it back.
If you wanted to make yourself nervous could focus on resurgence of core services, does that reflect underlying inflation pressures?
I tend not to be that nervous about underlying inflation pressures because of the looseness of labor markets. Measures of wage growth are all over the map but the most reliable ones are consistent with 2.5% inflation.
Plus shelter should, if anything, slow further.
Moreover smoothing over the last 12 months core services has been steadily slowing and core goods resurged with tariffs but that appears to be fading as tariffs raise the *level* of prices but not the rate of growth.
BTW, here is actual inflation in January. It was below core because falling energy prices outweighed the continued rise in food prices.
Bottom line: This is reassuring on inflation, is consistent with my view that underlying inflation is about 2.5% with some downward pressure.
Earlier this week we got good data on jobs.
So the Fed can afford to watch and wait before doing anything.
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