CPI Rose 0.17% in April

This morning, the government reported that seasonally-adjusted consumer prices rose 0.17% last month. (Most news sources round up to 0.2%, but I think it’s worth adding another decimal place.)

This was an interesting report because last month’s report was very unusual. The CPI fell by 0.29% during March. That was the biggest monthly fall since January 2015.

Even though the April CPI was positive, it was one of the lowest readings in the past year. The year-over-year inflation has fallen for the last two months. It’s down from 2.80% in February to 2.20% for April.

Now for the “core rate” which excludes food and energy prices. Last month, the seasonally-adjusted core rate fell by 0.12%. That was the steepest drop in 35 years. For April, the seasonally-adjusted core rate rose by just 0.07%. While it’s positive, that’s still the second-lowest monthly rate of the last four years.

The year-over-year change in the core rate is down to 1.89%. In January, it was at 2.26%.

Finally, here’s the real Fed funds rate adjusted for core inflation.

You can see that real interest rates are already going up. There’s no need for the Fed to do more.

Posted by on May 12th, 2017 at 1:00 pm


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